Aytenew Agumas

CHALLENGES OF PRACTICAL IMPLEMENTATION OF IFRS
IN ETHIOPIA, EVIDENCE FROM BANKING SECTOR
A THESIS SUBMITTED TO MBA COORDINATION OFFICE, COLLECGE

OF BUSINESS AND ECONOMICS, ADDIS ABABA UNIVERSITY
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN FINANCE
BY
AYTENEW AGUMAS BABIL
GSE/1521/08
ADVISOR
DR. SEWALE A.
DECEMBER, 2018
ADDIS ABABA, ETHIOPIA

Challenges of Practical Implementation of IFRS in Ethiopia
DECLARATION
I hereby declare that MBA. Thesis entitled, “Challenges of Practical Implementation of IFRS
in Ethiopia, Evidence from Banking Sector” is my original work and has not been presented for
a Degree/Diploma in any other university, and all sources of material used for this thesis have been
duly acknowledged.
Name: Aytenew Agumas Babil
Signature: _____________
Addis Ababa University i

SCHOOL OF GRADUATE STUDIES
ADDIS ABABA UNIVERSITY
ADVISORS’ APPROVAL SHEET
This is to certify that the thesis entitled, “Challenges of Practical Implementation of IFRS in
Ethiopia, Evidence from Banking Sector” submitted in partial fulfillment of the requirements
for the Degree of Master of business Administration in Finance has been carried out by Aytenew
Agumas, ID.No: GSE/1521/08 under my supervision. Therefore, I recommend that the student
has fulfilled the requirements and hence hereby can submit the thesis to the department.
_________________________ _________________ _______________
Name of the Advisor Signature Date
Addis Ababa University ii

SCHOOL OF GRADUATE STUDIES
ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS
GRADUATE PROGRAM
EXAMINERS APPROVAL SHEET

We, the undersigned, members of the Board of Examiners of the final open defense by Aytenew
Agumas Babil have read and evaluated his thesis entitled “Challenges of Practical
Implementation of IFRS in Ethiopia, Evidence from Banking Sector, and examined the
candidate. This is therefore to certify that the thesis has been accepted in partial fulfillment of the
the requirement of Degree Of Master Of Business Administration in Finance.
Approved by the Board of Examiners:
____________________________ _________________________ _____________________
Internal Examiner (Name) Signature Date
____________________________ _________________________ _____________________
External Examiner (Name) Signature Date
Addis Ababa University iii

ACKNOWLEDGEMENT
First and foremost, I would like to thank God Almighty for giving me the opportunity, strength
and ability to undertake and accomplish this study.
Next, I would like to express my sincere gratitude to my advisor Dr. Swale A. for his continuous
support, invaluable guidance and encouragement throughout my work.
My special thanks goes to Mr. Muhabie Mekonnen (Phd Candidate) for his unnerved effort
rendered towards the successful accomplishment of this study.
Besides to this, I want to acknowledge the IFRS project implementation team members of
Ethiopian Private Banks for their cooperation through provision of the necessary data.
This thesis would not have been successful if my better half Liyuwork Gebru had not shown love
and affection all through these years.
Aytenew Agumas
Addis Ababa University iv

Table of Contents
Acronyms .................................................................................................................................................... vii
List of Tables ................................................................................................................................................ ix
List of Figures ................................................................................................................................................ x
ABSTRACT..................................................................................................................................................... xi
CHAPTER ONE ........................................................................................................................................... 1
1. Introduction ......................................................................................................................................... 1
1.1. Background of the study ........................................................................................................... 1
1.2. Statement of the problem ......................................................................................................... 5
1.3. Objective of the study: .............................................................................................................. 9
1.4. Research Questions ................................................................................................................... 9
1.5. Scope and limitations of the study ............................................................................................ 9
1.6. Significance of the study ......................................................................................................... 10
1.7. Organization of the Paper ....................................................................................................... 10
CHAPTER TWO ........................................................................................................................................ 12
2. Review of Literature ......................................................................................................................... 12
2.1. Introduction............................................................................................................................. 12
2.2. Theoretical and Conceptual Literature Review ....................................................................... 12
2.3. History of International Convergence of Accounting Standards ............................................. 13
2.4. Structure and Governance of IASB .......................................................................................... 16
2.5. Acceptance of IFRS Worldwide ............................................................................................... 18
2.6. History and practices of Accounting in Ethiopia ..................................................................... 19
2.7. Review of Empirical Literatures ............................................................................................... 25
CHAPTER THREE .................................................................................................................................... 29
3. Research Methodology...................................................................................................................... 29
3.1. Research Purpose .................................................................................................................... 29
3.2. Research Design ...................................................................................................................... 29
3.3. Sources, Methods and Tools of Data Collection ..................................................................... 30
3.4. Target Population, Sampling Techniques and Sample Size ..................................................... 30
3.5. Methods of Data Analysis and Interpretation ......................................................................... 31
3.6. Reliability Test ......................................................................................................................... 32
CHAPTER FOUR....................................................................................................................................... 33
4. Results and Discussion...................................................................................................................... 33
Addis Ababa University v

4.1. Measuring IFRS implementation process and status of private banks ................................... 33
4.2. Analysis of the results of the Survey Questionnaire ............................................................... 35
4.2.2.1. Education level of the respondents ........................................................................... 36
4.2.2.2. Professional membership/Certification ..................................................................... 37
4.2.2.3. Experiences of IFRS Team Members .......................................................................... 37
4.2.3.1. Corporate governance................................................................................................ 38
4.2.3.2. Enforcement of Financial reporting regulatory Body................................................. 41
4.2.3.3. Professional Accountancy (Associations) Bodies ....................................................... 48
4.2.3.4. Education and Training............................................................................................... 54
4.2.3.5. Transition Period ........................................................................................................ 59
4.2.3.6. Proper Planning .......................................................................................................... 64
4.2.3.7. Availability and Transparency of Market Information ............................................... 67
4.2.3.8. Cost of IFRS Implementation ...................................................................................... 72
4.2.3.9. Management Support ................................................................................................ 76
CHAPTER FIVE ........................................................................................................................................ 80
5. CONCLUSION AND RECOMMENDATIONS .............................................................................. 80
5.1. Conclusion ............................................................................................................................... 80
5.2. Recommendations .................................................................................................................. 80
5.3. Implications for future Research ............................................................................................. 83
References ...................................................................................................................................................... i
Appendix .................................................................................................................................................... viii
Addis Ababa University vi

Acronyms
AABE Accounting and Auditing Board of Ethiopia

ACCA Association of Chartered Certified Accountants
ASE Accounting Society of Ethiopia
BOD Board of Directors
CEO Chief Executive officers
CIA Certified Internal Auditor
CPA Certified Public Accountant
DIPIFR Diploma international financial Reporting
EBA Ethiopian Bankers Association
ECSAFA Eastern, Central, and South African Federation of Accountants
ECX Ethiopian Commodity Exchange
EPAAA Ethiopian Professional Association of Accountants and Auditors
ERCA Ethiopian Revenue and Customs Authority
EU European Union
FDI Foreign Direct Investment
GAAP General Accepted Accounting Principle
HR Human Resources
IAS International Accounting Standards
IASB International Accounting Standard Board
IASC International Accounting Standard committee
ICAEW Institute of chartered Accountants in England and Wales
IFAC International Federation of Accountants Committee
IFRS International Financial Reporting Standards
IIA Institute of Internal Auditors
IMF International Monitory Fund
IOSCO International Organization of Securities Commissions
IPSAs International Public Sector Accountant
ISAC International accounting Standard committee
Addis Ababa University vii

IT Information System
MOFEC Ministry of Finance and Economic Cooperation
NAO National Audit Office
NBE National Bank of Ethiopia
NGOs None Governmental Organizations
OAG Office of Auditor General
OFAG Office of Federal Auditor General
PIE Public interest entities
PWC Price water house coopers
ROSC Research on Observance of Codes and Standards
SAC Standards Advisory Council
SIC Standards Interpretation Committee
SMEs Small and Medium Enterprises
SPSS Statistical Package software for social science studies
TOR Term of Reference
UK United Kingdom
UN United Nation
UNCTAD United Nations Conference on Trade and Development
US United States
USA United States of America
WTO World Trade organization
Addis Ababa University viii

List of Tables
Table 4.1: IFRS project implementation team formation across Banks------------------------------35

Table 4.2: Education levels the respondents-------------------------------------------------------------36
Table 4.3.Membership/Certification ----------------------------------------------------------------------37
Table 4.4: Corporate governance of Banks---------------------------------------------------------------39
Table 4.5: Effectiveness of review mechanisms and support -----------------------------------------42
Table 4.6: Adequacy of workshops, seminars, forums -------------------------------------------------43
Table 4.7: Reality of IFRS transition road map developed by AABE -------------------------------43
Table 4.8: Collaborate with relevant government Sectors---------------------------------------------44
Table4.9: Provision of technical guidelines, interpretations and tools ------------------------------45
Table 4.10: Effectiveness of monitoring and process review of IFRS implementation-----------45

Table 4.11: Coherence of the regulatory system and implementation of IFRS---------------------46
Table 4.13: Extent of the support of professional accountancy associations -----------------------49
Table 4.14: Ability of giving clarification---------------------------------------------------------------49

Table 4.15: Enhancing capacity building ---------------------------------------------------------------50
Table 4.16: The support of Professional Association and Banks IFRS implementation----------50
Table 4.17: Success of IFRS implementation-----------------------------------------------------------51
Table 4.18: Interaction of practitioners and academicians---------------------------------------------51
Table 4.19: The role of professional association and Experience sharing programs---------------52
Table 4.21: Education and Training----------------------------------------------------------------------55
Table 4.23: Likelihood of banks meeting the first IFRS reporting dead line-----------------------63
Table 4.24: Proper Planning-------------------------------------------------------------------------------65

Table 4.26: Cost of IFRS Implementation--------------------------------------------------------------73
Table 4.27: Ranking costs---------------------------------------------------------------------------------75
Table 4.28: Management support------------------------------------------------------------------------77
Addis Ababa University ix

List of Figures
Fig 4.1. Year of experience of respondents’-----------------------------------------------------------37

Fig.4.2.Frequency and Adequacy of Trainings--------------------------------------------------------57
Fig. 4.3: Extent of preparation Time--------------------------------------------------------------------59
Fig.4.4. IFRS implementation road map---------------------------------------------------------------60
Fig.4.5: Adequacy of preparation period---------------------------------------------------------------60
Fig.4.6: Requirements of Additional Preparation time-----------------------------------------------61
Fig 4.7: Length of Transition period and Quality-----------------------------------------------------61
Fig 4.8: Measurement of effective Interest rate -------------------------------------------------------68
Fig 4.9: Reliability, relevance and objectivity of accounting data----------------------------------69
Fig 4.10: Availability of Property Valuers-------------------------------------------------------------69
Fig 4.11: Availability of Actuaries----------------------------------------------------------------------70
Fig 4.12: Measurement of Financial Instruments-----------------------------------------------------70
Fig 4.13: Fair value measurement and Earning Manipulation---------------------------------------71
Addis Ababa University x

ABSTRACT
Since the turn of the century, there is an unprecedented appreciation of the usefulness of the
International Financial Reporting Standards (IFRS) across the globe. As a single set of globally
converged, high quality accounting standards, IFRS are designed to serve as a common global
language for business affairs so that company accounts are understandable and comparable
across the globe. As a result, by recognizing the relative importance of IFRS, over 150 countries
required or permitted IFRS as their corporate financial reporting standard. Despite this
widespread acceptance of IFRS, there are serious institutional, enforcement and technical
challenges that countries need to overcome in order to benefit fully from the introduction of IFRS
in their jurisdictions. Ethiopia is one of those countries that face serious challenges to implement
IFRS. Therefore, this research is intended to investigate the practical challenges of IFRS adoption
in Ethiopia, particularly in private commercial banks. To achieve this objective, both primary and
secondary data were collected from IFRS implementation team members of 12 private banks who
were selected purposively based on their role and involvement in the implementation process.
Primary data were collected through questionnaire and interview whereas secondary based were
collected through documentary evidence and analyzed by using different descriptive statistical
tools. Finally, the result of the study revealed that weak corporate governance, poor quality of
education and training, lack of supports from accountancy professional bodies, weak
enforcements of regulatory body, inadequacy of transition period, improper planning, non-
availability of transparent market information, high cost of implementation and weak management
support are the major challenges of adopting IFRS by private banks in Ethiopia.
Keywords: IFRS, Adoption/Implementation, Ethiopia, Private Banks, and Challenges.
Addis Ababa University xi

CHAPTER ONE
1. Introduction
This section of the study explained Background of the study, statement of the problem, objective
of the study, significance of the study, scope of the study and limitation of the study and
organization of the study with the intention to provide introductions and to set out the overall
structures of the study
1.1. Background of the study
Globalization made countries borderless and economic resources Mobil across the world. Now a
day’s International trade and investment becoming increasingly global due to real world suffer
from market imperfection. Multinational companies are seeking out foreign opportunities to
capitalize resource from foreign countries. The increasing growth in international trade, cross
border financial transactions and investments which unavoidably involves the preparation and
presentation of accounting reports that is useful across various national borders (Armstrong et al.,
2007)(as cited inOkpala,2012).
However, Accounting as the language of business is practiced differently within varying historical,
political, economic and social environments (Hellmann et al., 2010). Pacter (2011) argued that
historically accounting standards evolved country by country– Set by government, or accounting
profession, or independent board. Using different national accounting standards, making it difficult
and costly to compare investment opportunities in different countries (UNACTED, 2008). Prather-
Kinsey (2006) stated that “dissimilar financial reporting and accounting practices make it very
difficult for users of accounting and financial reports to consolidate such information and make
comparisons of firms that are listed in different countries”. National standards made sense when
companies raised money in, and investors sought investment opportunities in, only their home
country (Pacter, 2011).Therefore, Having access to financial statements that are written in the same
“language” would eliminate what has historically been a major impediment to engendering
investor confidence, which is sometimes referred to as “accounting risk”( Epstein &
Jermakowicz,2010).
Addis Ababa University 1

The faster pace of globalization, the growing interdependence of international financial markets
and the increased mobility of capital have added to the pressure and demand for the harmonization
of accounting and financial reporting frameworks and related standards around the world
(UNACTED,2008). Renders & Gaeremynck (2007) argued that “Growth in international trade and
capital flows and a rising cross-border economic integration over the past decades have led to the
desire to harmonize accounting standards across countries”. Without common standards, it is
difficult to compare financial information prepared by entities located in different parts of the
world (Mirza et al., 2006). Therefore, adopting a single global accounting language will ensure
understandability, comparability and transparency of financial statements which will strengthen
the confidence of investors and other users of accounting information around the world (Dholakia,
2012).
Consequently, the accounting profession has responded this requirement through establishing
Accountants International Study Group in the year 1967, which has made great significant by
publishing papers on topics with accounting standards. After years of study, the process of
international convergence towards a global set of standards started and international accounting
Standard committee (ISAC) was established in the mid 1973 by Accountancy professional bodies
from nine countries namely Australia, Canada, France, Germany, Japan, Mexico, the Netherlands,
the United Kingdom and Ireland, and the United States (UNACTED, 2008, Needles & Powers,
2011, Epstein & Jermakowicz, 2010, Mirza et al., 2006, Kuar&Kumar, 2014).
In 2001, fundamental changes were made to strengthen the independence, legitimacy, and quality
of the international accounting standard-setting process and, the IASC was replaced by the
International Accounting Standards Board (IASB) as the body in charge of setting the international
standards and the international accounting standards (IAS) are renamed International financial
reporting standards (IFRS). The objective of the IASB is to develop a single set of high quality,
understandable, enforceable and globally accepted financial reporting standards that bring
transparency, accountability and efficiency to financial markets around the world (IFRS
Foundation, 2015).
The convergence process has gained speed when the International Organization of Securities
Commissions (IOSCO) endorsed the IASC standards for international listings in May 2000

(UNACTED, 2008). Besides EU through ‘‘The European Union Act 1606/2002 mandated
companies listed on European stock exchanges to prepare their consolidated group accounts in
accordance with IFRS effective the year 2005,which is the millstone for the development of
international accounting convergence.
Since then, International Financial Reporting Standards (IFRS) are gaining acceptance worldwide
and about 150 jurisdictions in the world have been adopted or required IFRS as their reporting
standard (www.ifrs.com).
The comparability, credibility, and positive capital market effects of adoption to capital market
participants are not disputed. However, the impact, benefits and costs of the transition to IFRS
vary from country to country depending on is starting point, characteristics and culture (Dunne et
al., 2008).Chartered Accountants World Wide (ICEAW) (2015) on its summaries of 200 empirical
research papers conducted on the effects of mandatory IFRS adoption conclude that “IFRS
adoption benefits were unevenly distributed among different firms and different countries due to
differences in institutions and incentives, there may have been either negligible benefits or even
negative effects rather than benefits for particular firms or countries”. Zehri & Chouaibi (2013)
argued that the developing countries transition modalities to the IFRS differ from those of
developed countries.
In recognizing of the benefits of IFRS adoption, Ethiopia has enacted financial reporting
proclamation in the year 2014 which can be applicable by all reporting entities operating in
Ethiopia and announced the official adoption of IFRS as established by IASB. Accordingly, the
Accounting and Auditing Board of Ethiopia has established as per council of ministers regulation
no.332/2014 as an autonomous governing organ to Promote high quality reporting of financial
and related information by reporting entities and to regulate the accounting Auditing profession
of Ethiopia.
Implementing IFRS will help Ethiopia to increase stability, stewardship, accountability and
transparency, increase the education of accounting profession and Standard setting bodies,
improve good governance and reduce corruption and rent seeking behavior (AABE,
2016).According to UNACTED (2008) “Sound and internationally comparable corporate financial
reporting that meets the requirements of financial markets improves investor confidence, facilitates

risk assessment in making investment decisions, and helps reduce the cost of capital”(para.11).
Kassa (2015) argued that IFRS leads to improved comparability & reliability of financial
statements reduce cost of capital of firms through lower cost of information, facilitate easier
international mobility of professional staffs across national boundary, greater marketability of
shares, and reduced information asymmetry and others.
As per Financial Reporting proclamation 847/2014 article 5 (2), the public interest entities are
required to comply International Financial reporting standard when preparing financial statements.
Among others, Banks are the one and the biggest form of public interest entities which mobilizes
financial resources from the public and injects it to the economy.
Ethiopian banks were accounted and presented their financial transaction based on requirements
provided under commercial code 1960 and NBE proclamation 592/2008 for the last many years.
However, both the commercial code and NBE proclamation has no requirements for compliance
with any defined accounting standards (ROSC,2007).Consequently, inconsistency of reporting
method from period to period and usage of different reporting methods among Ethiopian private
banks were observed until the closing of the year, 2016.As stated on their annual financial report
,Some private banks were reported based on IFRS, some were based on GAAP and others based
on internally developed accounting policies and procedures. Though, some companies including
banks says reported their financial statement under IFRS, it was revealed that there were significant
differences between the actual accounting practices and IFRS requirements and concluded that the
actual accounting practice in Ethiopia differ from IFRS (ROCS, 2007, Tesfu, 2012, Mihiret, 2016).
Accordingly, AABE has warned reporting entities in Ethiopia not to refer IFRS on their financial
statement unless they fully comply with all the requirements of the IFRSs applicable to their
circumstances (AABE, 2016). For smoothening the process of the adoption, AABE has established
a three phase IFRS implementation road map under its four year strategic plan running from the
year 2016-2020.Based on this Ethiopian banks are the one and the first which are required to adopt
IFRS from July, 2016 and expected to issue IFRS based financial statements for the year ending
June 30, 2018. To this end, Ethiopian private banks are now busy in conducting activities which
are required by first time adopters stated under IFRS1. As a first time adopter it is inevitable that
many factors will likely influence the probabilities of the adoption of IFRS by private banks
positively or negatively.

Therefore, the aim of this study is to investigate the practical challenges of IFRS adoption in
Ethiopia specifically in Private commercial Banks.
1.2. Statement of the problem

IFRS are clearly emerging as a global financial reporting benchmark and most countries have
already started using them as their benchmark standards for listed companies. Currently, around
150 jurisdictions worldwide have required or permit IFRS as a basis for their corporate reporting
(Retrieved from www.Ifrs.com). However, the principles behind the adoption of IFRS by different
countries have always been the subject of controversy in accounting literature. This is because
different researchers arrive at different conclusions and it is applicable only to some companies or
some countries (ICAWE, 2015).
Some researchers argued that IFRS improves transparency & comparability of companies
financial statements, reduces cost of capital, increasing of cross border transactions and improve
the efficiency of corporate investment (Daske and Gebhardt,2006, Dodiya,2013, Harton
Etal,2010, Lourenço & Branco, 2015). On the other hand, Clarkson et al.(2011) found that IFRS
adoption has failed to enhance financial reporting quality, examine 1,722 firms from nine
European countries in which early IFRS adoption (as cited Masoud, 2014). Various studies fail to
find strong evidence that IFRS improves information set of investors and found limited or no
capital market benefits for mandatory adopters (Das et al, 2008 ) as cited in ( Harton et al., 2010)
.Other researchers argued that the quality and comparability of information are questioned due to
the difference of implementation and interpretation of the same standards by different countries
(Ankarath et al., 2010, Harton et al., 2010). Achieving comparability in financial reporting
depends on a consistent interpretation and application of IFRS across countries. Social, political,
economic and cultural factors in countries influence accountants' professional judgments, and
differences across countries may lead to an inconsistent interpretation and application of IFRS
(Poudel et al., 2014). On their study of IFRS adoption the case of Nepal found that the adoption of
IFRS is likely to be problematic due to the country's contextual environment. Accordingly, Dunne
et al., (2008) argue that the impact, benefits and costs of the transition to IFRS vary from country
to country depending on is starting point, characteristics and culture. ICAEW (2015) on its
summaries of 200 empirical research papers conducted on the effects of mandatory IFRS adoption
conclude that “IFRS adoption benefits were unevenly distributed among different firms and

different countries due to differences in institutions and incentives, there may have been either
negligible benefits or even negative effects rather than benefits for particular firms or countries”.
However, it seems likely argued that IFRS improves transparency, comparability, credibility, and
positive capital market effects, reduces cost of capital, corporate investment efficiencies and
international capital flows (Dunne et al., 2008.,UNACTED,2008, Mira etal, 2006, Epstein &
Jermakowicz,2010, Zeghal &Mhedhbi ,2006, Daske and Gebhardt,2006, Dodiya,2013, Harton
Etal,2010, Lourenço & Branco, 2015).
In recognizing of the benefits using international accounting standards many developing countries
have made efforts to adopt IFRS. However, the process of the adoption presented many challenges
especially for most of the African countries. The cases study some countries shown that Regulatory
system enforcement mechanisms and lack of technical capacities are the major challenges
(UNACTED, 2008).
For instance, in Libya lack of technical skills and inadequate knowledge professional accountants,
inconsistency of regulatory framework, inadequate education and training of accountants,
weakness of professional accountancy body and lack of an independent oversight body were
challenges faced during IFRS adoption (Zakari,2014). In Nigeria IFRS implementation faces
problems including of lack considerable preparation time, lack of coherence of laws, shortage of
accountants and auditors who are technically competent in implementing, lack of Training
materials on IFRS at affordable costs (Madawaki, 2012). Like Libya and Nigeria, the case study
of Kenya and south Africa shows that there had been facing a problem of conflicting of existing
laws and IFRS requirements, the gap between accounting education and IFRS, in ability of
accountants and professional bodies to apply IFRS ,Cost of implementing IFRS, complexity of
standards were the major problems (UNACTED,2008).
Recently, Ethiopia has officially adopted IFRS as a means of its corporate reporting through
proclamation number 847/2014. Accordingly, the Accounting and Auditing Board of Ethiopia
(AABE) has designed IFRS implementation road map and announced the commencement dates of
different groups of reporting entities. Based on this roadmap, Government development
organizations and public interest entities including banks should have been started to IFRS

transition in July, 2016 and expected to close their book of accounts as at June 30, 2018 based on
IFRS requirements.
However, IFRS adoption cannot be realized simply through stating that the country has adopted
IFRS. Evidence implies that moving to a single set of accounting standards is not enough to
produce the required outputs rather benefits of adopting IFRS depends on the strengths of
supporting institutions, rigorous enforcement, education and trainings, and professional
competence and integrity (Hail et al.,2009, UNACTED,2008,ICAEW,2007).
There was no accounting and auditing standards set in Ethiopia and the accounting practices of
vary among institutions and differ from IFRS requirements. Its corporate reporting practice was
dominated by various sectorial laws and regulations such as Commercial code, Tax law, NBE
regulation and Charities societies’ law etc. Besides, its poor experience of implementing
international accounting standards and availability of weak financial reporting infrastructures
would expect to pose many challenges during their practical application of IFRS by reporting
entities.
To date, little academic research has been published on the areas of IFRS adoption in Ethiopia
since the history of adoption is a recent phenomenon. Some academic studies were conducted
focusing on the benefits, challenges and progress of IFRS adoption in Ethiopia. According to these
studies implementation costs, complexity of standards, lack of IFRS implementation guidance,
increased volatility of earnings, lack of technical skills and inadequate knowledge of professionals,
Resistance to Change, Absence of Professional Institutions, high level training requirement, lack
of proper instructions from regulatory bodies problem, and problem with IFRS use of fair value
accounting were identified as the major challenges IFRS adoption in Ethiopia (Mihiret, 2016,
Kassa et al, 2015, Hailemichale, 2016, Simegn, 2015, and Deyuu and Pasricha, 2016, Bekelle,
2016).However, All of this studies were conducted before the commencement of Mandatory IFRS
adoption (Pre-IFRS) and their findings are provided in references of the voluntary adopters and
based on the perceptions of users of financial statements. Mihiret (2016) and Tesfu (2012) stated
that their studies and findings were based on theoretical justifications and perceptions of financial
statement preparers, auditors, managers and regulators and recommended to study the practical
issues during implementation, on their future research suggestion parts.

According to World bank & IMF joint initiative (ROSC,2007), on a sample of 35 audited financial
statements including those said reported under IFRS revealed that there were significant
differences between the actual accounting practices and IFRS requirements. On the same vein
Tesfu (2012) documented that even though the companies report stated prepared based on IFRS,
they are not applying the standards properly rather they make some minor amendments to the
existing financial reporting standards.
This shows that the findings of these studies were affected by the improper applications of the
standards and some of them were conducted based on ideally arguments instead of practical
evidences. For instance, Hailemichael (2016) were conducted his study in the case of financial
institutions while the actual implementation date of these institutions started after the date of this
study (May, 2016). It indicates that his study didn’t take in to account of the practical issues of
IFRS implementations and its validity needs to be confirmed during the practical implementation
period.
In terms of Measurement, to the best knowledge of the researcher this is the only study which
employed three to eight parameters (items) to measure each of the practical challenges. The
previous researchers measure the challenges of IFRS adoption with a single item which leads a
risk of potentially misleading results. Warmbrod (2014) argued that the sum of the response to a
set of multiple items is more stable, reliable and unbiased estimate than response to any single item
in a Likert scale. For instance, (Hailemichael, 2016, Tesfu, 2012, Bekelle, 2016 and Mihret, 2016)
measure IFRS adoption costs by mentioning as “IFRS adoption is costly” while collecting the
agreements or disagreements of the respondents. They failed to mention what are those costs and
how much are their magnitude to avoid the possibility of biasness where as in this study the sum
score of seven items were used to measure the cost of IFRS implementation such training cost,
audit & compliance, consultant, IT, Cost of updating accounting system, cost of purchasing
implementation guidelines and additional staff costs.
Therefore, this study is designed to examine and identify the challenges hindering the practical
implementation of IFRS in Ethiopia particularly in private banks. One of the state commercial
bank, commercial bank of Ethiopia is exclude from this study as it has already implemented IFRS
before a year. In addition this study has evaluated the status of the IFRS implementations of private

banks by taking transition road map designed by AABE and subsequently cascaded work schedule
developed by the banks as a bench mark.
1.3. Objective of the study:
1.3.1. General Objectives of the Study

The general objective of this study is to describe the practical challenges of IFRS implementation
by private banks
1.3.2. Specific Objectives

• To Study the process of IFRS implementation of Ethiopian Private commercial Banks.
• To investigate the efficiency of IFRS adoption by private commercial banks
• To assess the challenges that hindered during the practical implementation IFRS in private
banks such as weak corporate governance, poor quality of education and training, lack of
supports from accountancy professional bodies, weak enforcements of regulatory body,
inadequacy of transition period, improper planning, non-availability of transparent market
information, high cost of implementation and weak management support.
1.4. Research Questions

The research is designed in a way to address the following questions;
1. How private banks are facilitating the IFRS implementation project
2. How are efficient and smooth are IFRS adoptions by Private commercial Banks
3. What are the practical challenges faced in the process of Practical implementation of IFRS in
private banks
1.5. Scope and limitations of the study

It would be vital conducting a study in the case of all significant public interest entities which are
the first phase IFRS adopters in Ethiopia. However, due to time and finance constraints and seeking
the flexibility of the data collection this study is covered IFRS adoption the case of private bank
of Ethiopia. The reasons for the selection of private banks are, they are operating under the same
regulatory environment and their IFRS adoption is handled at the same time with the formation of
similar adoption strategies. It helped the researcher to avoid the biasness of the data that may create
in connection with the difference of above mentioned cases. The study mainly assessed and
examined the practical challenges faced during by private banks during convergence of their

existing accounting system to IFRS. One of the state commercial bank, commercial bank of
Ethiopia is exclude from this study as it has already implemented IFRS a year ago.
Lack of adequate empirical evidences in Ethiopian context which enable to support the researchers
finding are one of the limitations of this study. Secondly, Non-willingness of banks to accept
researches as a whole was a big challenge for the researcher. Out of 16 private banks four banks
are restricted to conduct researches in the case their organization. In addition to this project teams
of those banks allowed to conduct the research are over burden with the implementation activities.
Due the researcher was forced to knock the doors of the banks more than four times and the process
of the data collection took more than a month. The last but not the least limitation of the study was
lack of adequate time for data collection.
1.6. Significance of the study

The result of this study expected to provide a better understanding about the practical challenges
and their impacts on IFRS implementation to financial statement preparers, auditors, regulators
and managers.
The findings of the study are expected to provide useful and timely information to the regulatory
body (AABE) on the activities to be done for the realization of the IFRS adoption by the second
and third phase adopters.
The findings of this study may also help the second and third phase adopters to prepare and get
ready for implementing IFRS through taking proactive actions on potential challenges that may
happen in their adoption.
This study will have knowledge contribution, provides an important introduction to the areas of
IFRS adoption in Ethiopia and will add valuable contributions to the existing body of literature
and assist the future researchers in obtaining new ideas and perspectives for their study.
1.7. Organization of the Paper

To answer the research questions and achieve the above stated objectives, this study has organized
in to five chapters. Chapter one consists of the introduction part, background of the study,
statement of the problem, objective of the study, significance of the study, scope and limitations
of the study. The second chapter of this study discussed literatures available in the areas of IFRS
adoption which includes defining of the terms and concepts, review of theoretical and empirical
literature, and designing of conceptual frame work on challenges of practical implementation of

IFRS in Ethiopian private commercial banks. Methodology of the research, which includes research
design, the data collection methods and tools, the sources of data, sampling design, Data analysis
methods and description of variables to be used in the research has been presented in the third
chapter. The fourth chapter has presented the results and discussions of the research study, based on
data collected by the researcher from primary and secondary sources of data. Tthe final chapter is
summarized the findings of the research work, concluded the results and forwarded
recommendations based on the findings of the study.

CHAPTER TWO
2. Review of Literature
2.1. Introduction
Globalization has laid down a way for all the countries to adopt a single set of accounting (kaur
and Amkumar, 2014). In an increasingly global economy, the use of a single set of high-quality
accounting standards facilitates investment and other economic decisions across borders, increases
market efficiency, and reduces the cost of raising capital (Mira etal, 2006). With the growing
internationalization of economic trade and the globalization of businesses and financial markets,
financial information prepared according to a national accounting system may no longer satisfy
the needs of users whose decisions are more and more international in scope (Zeghal & Mhedhbi,
2006).
Achieving consistency in financial reporting worldwide is the need of the hour, especially if
meaningful comparisons are to be made of financial information emanating from different
countries using accounting standards that, until recently, were vastly different from each other.
Thus, there has arisen the urgent need for promulgation of a common set of global accounting
standards or, in other words, global convergence into a common language of accounting for the
financial world (Mirza et al., 2006).
Without common standards, it is difficult to compare financial information prepared by entities
located in different parts of the world ((Mirza et al., 2006). The impetus for the convergence of
historically disparate financial reporting standards has been, in the main, to facilitate the free flow
of capital (Epstein & Jermakowicz, 2010).
2.2. Theoretical and Conceptual Literature Review

International Financial Reporting Standards (IFRS) are principles-based Standards, Interpretations
and the Framework adopted by the International Accounting Standards Board (IASB).
IFRS is a single set of high quality, understandable and enforceable global accounting standards
Published by the London-based International Accounting Standards Board (Deloitte, 2008, Mirza
et al, 2011). Dodiya (2013) defined IFRS as “principles-based Standards, Interpretations and the
Framework adopted by the International Accounting Standards Board (IASB)”.

Convergence of accounting standards means harmonisation of national GAAP or existing

accounting system with IFRS through design and maintenance of accounting standards in a way
that financial statements prepared with national accounting standards are in compliance with IFRS
( Phan,2014).It is also defined as the goal of establishing a single set of accounting standards that
will be used internationally(Retrieved from http://en.m.wikipedia.org/ convergence of accounting
standards)
2.3. History of International Convergence of Accounting Standards

Financial reporting for capital markets purposes developed initially in the UK, in a common law
environment where the state legislated as little as possible and left a large degree of interpretation
to practice and for the sanction of the courts (Epstein & Jermakowicz, 2010). This approach was
rapidly adopted by the US as it, too, became industrialized. IFRS are an example of the second,
capital market-oriented, systems of financial reporting rules.
The history of international convergence of accounting standards began in1950s and early 1960s
in response to post World War II economic integration and the related increase in cross boarder
Capital flows (Retrieved from http://www.ifrs.org/about-us/IFRS/Pages/organization-history.aspx).
Accounts international study group was found in 1967 which aggressively championed for change
by publishing papers on topics with great significance. As a result of these papers, the way was
paved for the standards that were to come, and in 1973, and agreement was reached to establish an
international body with the sole purpose of writing accounting standards to be used internationally
(Retrieved from http://www.difference between.net/business/difference-between-ias-and-ifrs/).
In the mid-1973 ,International accounting Standard committee (ISAC) was established by

Accountancy professional bodies from nine countries namely Australia, Canada, France,
Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland, and the United States
(UNACTED, 2008, Needles & Powers, 2011, Epstein & Jermakowicz, 2010, Mirza et al., 2006,
Kuar & Kumar, 2014). These bodies were members of the International Federation of Accountants
in more than 100 countries (IFAC) (Needles & Powers, 2011, Mirza et al., 2006)
The principal significance of IASC was to encourage national accounting standard setters around
the world to improve and harmonize national accounting standards.

Its objectives were to:

• Formulate and publish in the public interest accounting standards to be observed in the
presentation of financial statements and to promote their worldwide acceptance and observance
• Work generally for the improvement and harmonization of regulations, accounting standards,
and procedures relating to the presentation of financial statements
During its existence, IASC issued 41 numbered Standards, known as International Accounting
Standards (IAS), as well as a Framework for the Preparation and Presentation of Financial
Statements. However, IASC was criticized as permitting too many alternative treatments intended
to satisfy the great variation in accounting practices among all the members (Needles & Powers,
2011). In addition, Epstein & Jermakowicz (2010) mentioned that a need for a common language
of business was felt, to deal with a growing volume of international business, but other more
political motives abounded also. In response to criticism, the IASC began work on revising the
current standards into a set of “core” standards that allow fewer alternatives that urged the
restructuring of the IASC to make it more independent of the member bodies. As stated on Epstein
& Jermakowicz (2010) IASC members voted to abandon the organization’s former structure,
which was based on professional bodies, and adopt a new structure.
Therefore, in 2001 fundamental changes were made to strengthen the independence, legitimacy,
and quality of the international accounting standard-setting process, in particular, the IASC was
replaced by the International Accounting Standards Board (IASB) as the body in charge of setting
the international standards (Mirza et al., 2006). The International Accounting Standards Board
(IASB) started operations in April 2001 as the successor to the International Accounting Standards
Committee (IASC).The International Accounting Standards Board (IASB) is an independent
standard-setting board and does not represent any particular country, and is not part of any other
international bodies such as IFAC.
Mirza et al., (2006) stated the following Key Differences between IASC and IASB
• Unlike the IASC, the IASB does not have a special relationship with the international accounting
profession. Instead, IASB is governed by a group of Trustees of diverse geographic and functional
backgrounds who are independent of the accounting profession.

• Unlike the Board members of the IASC, Board members of the IASB are individuals who are
appointed based on technical skill and background experience rather than as representatives of
specific national accountancy bodies or other organizations.
• Unlike the IASC Board, which only met about four times a year, the IASB Board usually meets
each month. Moreover, the number of technical and commercial staff working for IASB has
increased significantly as compared with IASC. (Similar to IASC, the headquarters of the IASB is
located in London, the United Kingdom.)
The interpretive body of the IASC (SIC) has been replaced by the International Financial
Reporting Interpretations Committee (IFRIC).
The objectives of the IASB are to
(a) Develop, in the public interest, a single set of high-quality, understandable, and enforceable
global accounting standards that require high-quality, transparent, and comparable information in
financial statements and other financial reporting to help participants in the various capital markets
of the world and other users of the information to make economic decisions;
(b) Promote the use and rigorous application of those standards; and
(c) Work actively with national standard setters to bring about convergence of national accounting
standards and International Financial Reporting Standards to high-quality solutions.
New Standards issued by IASB are known as IFRS. When referring collectively to IFRS, that term
includes both IAS and IFRS and New interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) are known as IFRIC Interpretations.

2.4. Structure and Governance of IASB
Trustees of the IASC Foundation
International Accounting
Standard Board
Standards Advisory International Financial Reporting

Committee Interpretations Committee
(Standards
Source: www.ifrs.org Interpretations Committee)
2.4.1. Trustees
The governance of IASB rests with the Trustees of the International Accounting Standards
Committee Foundation (the “IASC Foundation Trustees” or, simply, the “Trustees”) (Ankarath et
al., 2010, Mirza et al., 2006, Hussey& Ong, 2005). The Trustees comprise 22 individuals who are
chosen from around the world. In order to ensure a broad international representation, it is required
that six Trustees are appointed from North America, six from Europe, six from Asia/Oceanic
region, and four from any part of the world, subject to establishing overall geographical balance
(Ankarath et al., 2010). The Trustees are independent of the standard-setting activities (which is
the primary responsibility of the Board members of the IASB). Instead, the Trustees, on the other
hand, are responsible for broad strategic issues, such as
• Appointing the members of IASB, the IFRIC, and the Standards Advisory Council (SAC);
• Approving the budget of the IASC Foundation and determining the basis of funding it;
• Reviewing the strategy of the IASC Foundation and the IASB and its effectiveness
including consideration, but not determination, of the IASB’s agenda (which if allowed
may impair the Trustees’ independence of the standard-setting process);
• Establishing and amending operating procedures, consultative arrangements and due
process for the IASB, the IFRIC, and the SAC;
• Approving amendments to its constitution after consulting the SAC and following the
required due process;

• Fostering and reviewing the development of the educational programs and materials that
are consistent with the objectives of the IASC Foundation; and
• Generally, exercising all powers of the IASC Foundation except those expressly reserved
for IASB, the IFRIC, and the SAC.
2.4.2. The Board

The Board is responsible for all standard-setting activities, including the development and adoption
of IFRS (Ankarath et al., 2010, Mirza et al., 2006). The Board has 14 members from around the
world who are selected by the Trustees based on technical skills and relevant business and market
experience. The Board, which usually meets once a month, has 12 full-time members and 2 part-
time members. The Board members are from a mix of backgrounds, including auditors, preparers
of financial statements, users of financial statements, and academics.
The IASB has the complete responsibility for all IASB technical matters including preparation
and issuing of IFRS and Exposure Drafts that precede issuance of the final standards (i.e., the
IFRS).
There are 17 IFRS Issued by the IASB to July, 2017
IFRS 1, First-Time Adoption of International Financial Reporting Standards
IFRS 2, Share-Based Payment
IFRS 3, Business Combinations
IFRS 4, Insurance Contracts will be replaced by IFRS 17 effective January, 2021
IFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations
IFRS 6, Exploration for and Evaluation of Mineral Resources
IFRS 7, Financial Instruments: Disclosures
IFRS 8, Operating Segments
IFRS 9, Financial Instruments
IFRS 10, Consolidated Financial Statements
IFRS 11, Joint Arrangements
IFRS 12, Disclosure of Interests in Other Entities
IFRS 13, Fair Value Measurement
IFRS 14, Regulatory Deferral Accounts
IFRS 15, Revenue from Contracts with Customers

IFRS 16, Leases

IFRS 17, Insurance Contracts published on May 17, 2017 to replace IFRS 4
2.4.3. Standards Advisory Council

IASB is advised by the Standards Advisory Council (SAC). It has about 40 members appointed
by the Trustees and provides a forum for organizations and individuals with an interest in
international financial reporting to provide advice on IASB agenda decisions and priorities (Mirza
et al., 2006). Members currently include chief financial and accounting officers from some of the
world’s largest corporations and international organizations, leading financial analysts and
academics, regulators, accounting standard setters, and partners from leading accounting firms.
2.4.4. International Financial Reporting Interpretations Committee (IFRIC)

IFRIC members are appointed by the Trustees. The IFRIC is the IASB’s interpretive body and is
in charge of developing interpretive guidance on accounting issues that are not specifically dealt
with in IFRS or that are likely to receive divergent or unacceptable interpretations in the absence
of authoritative guidance (Ankarath et al., 2010). The Trustees select members of the IFRIC
keeping in mind personal attributes such as technical expertise and diversity of international
business and market experience in the practical application of IFRS and analysis of financial
statements prepared in accordance with IFRS. The IFRIC shall comprise 14 voting members.
2.5. Acceptance of IFRS Worldwide

The international accounting standard-setting process has been able to claim a number of successes
in achieving greater recognition and use of IFRS.
A major breakthrough came in 2002 when the European Union (EU) adopted legislation through
European Union Act 1606/20020 that required listed companies in Europe to apply IFRS in their
consolidated financial statements (Needles & Powers, 2011, Ankarath et al., 2010, Epstein &
Jermakowicz, 2010). The legislation came into effect in 2005 and applies to more than 8,000
companies in 30 countries, including countries such as France, Germany, Italy, Spain, and the
United Kingdom.
In addition, in November, 2007, in a surprise move that is considered by some as the most
significant nod of friendliness and an astounding move toward convergence in recent times, the
U.S. SEC opened its doors to IFRS. The SEC dropped the reconciliation to US GAAP requirement

that had formerly applied to foreign private registrants; thereafter, those reporting in a manner fully
compliant with IFRS (i.e., without any exceptions to the complete set of standards imposed by
IASB) do not have to reconcile net income and shareholders’ equity to that which would have been
presented under US GAAP. This defining moment in the fast-tracked race of the IASB has helped
gain global acceptance of the SEC’s standards. Since then, International Financial Reporting
Standards (IFRS) are gaining acceptance worldwide and about 150 jurisdictions in the world have
been adopted or required IFRS as their reporting standard (www.ifrs.com).
2.6. History and practices of Accounting in Ethiopia

Accounting professionalization in Western societies is closely related to the rise and development
of industrial economy (Hoskin & Macve, 1986; Sikka & Willimtt, 1995; Wilmott, 1986) (cited in
Terdpaopong and Mihret, n.d). On the other hand the developing countries accounting systems has
been shaped by Western countries (Wijewardena and Yapa 1998; Ashraf and Ghani 2005) (cited
in Kidane, 2012).This is due to the impact of colonizers and the development of accounting
professionalization by western countries. For instance most of former British colonies modeled
their accounting practices around the British systems (Ashraf and Ghani 2005) (cited in Kidane,
2012). Sirilanka, Ghana and Pakistan adopts the British accounting system which were colonies
of this country.
Even though Ethiopia has existed as an independent country throughout its recorded history, it has
had periods of very open relationships with Western powers – especially Britain and USA (Mihiret
and Bobe, 2014).
The craft of modern accounting started in Ethiopia in 1905 with the establishment of the Bank of
Abyssinia as a branch of the Bank of Egypt, which was in turn administered under the British
financial system (Mihret and bobe, 2014, kidane, 2012).They argued that as result of the above
British accounting terminology and financial reporting requirements were used and personnel
training reinforced the adoption of British-oriented accounting practice. British experts were the
first to introduce public accounting practices in Ethiopia; and the first Ethiopian professional
accountants obtained certifications from British accountancy bodies (kidane, 2012). public
accounting started in Ethiopia in the 1940s with the establishment of Ethiopian branches by British

accounting firms, namely Price Waterhouse and Peat & Co., mainly to service foreign subsidiaries
of their British clients (Kinfu, 1990) (cited in Mihret & Bobe 2014).
In 1944, the Audit Commission was established by proclamation (Imperial Government of

Ethiopia, 1944) to ‘examine and control the accounts of the Ministry of Finance’, whereas accounts
of other ministries were ‘controlled and examined by officers of the Ministry of Finance’ (Article
3). Article 2 of Proclamation 79/1946 extended the commission’s responsibility with a view to
“centralizing the audit and control of all Government accounts under one Department [i.e., the
commission.” Subsequently, The Office of the Auditor General (OAG) was established by Decree
32/1958 and then Proclamation 199/1961, with greater authority of public sector auditing than was
provided in 1944 (Government of Ethiopia, 1961). The 1940s saw the start of internal and external
auditing.
In response to the growth of private sector business in subsequent decades, the Commercial
Code of Ethiopia was proclaimed in 1960 (Government of Ethiopia, 1960), which served as
another landmark in Ethiopia’s accountancy development.
The code contains accounting and external auditing provisions, which serve as the basis of
companies financial reporting accompanied with other sector specific regulations and directives
such as ERCA and NBE directives until the publication of financial reporting proclamation
847/2014 and repealed this law. Article 63-85 of the code specifies accounting and auditing
requirements of traders and business organizations. Article 63(1) requires “any person or business
organization carrying on trade to keep books and accounts as are required in accordance with
business practice and regulations having regard to the nature and importance of the trade carried
on”.
The second development was the formation of the Office of the Auditor General (OAG) was then
established in 1961 by proclamation number 199/1961 (Government of Ethiopia 1961), which
accorded the OAG greater authority than the Audit Commission that was established in 1944
(Argaw 2000; Kinfu 1990) (cited in kidane, 2012)

Due to the change in political order of Ethiopia, the over thrown of the derge regime in 1974 the
development of accounting appears to have been held back (Argaw, 2000; Blake, 1997; Kinfu,
2005) (cited kidane,2012).He also cited that international public accounting firms that have been
operating in Ethiopia, i.e. Price Waterhouse Peat and Co and Mann Judd & Co., were closed
(Kinfu, 2005; Weldegiorgis, 1992).Consequently, a state-owned Audit Service Corporation (ASC)
was established by Proclamation No. 126/ in order to fill the gap created by the exit of UK public
accounting firms (Mihret and Bobe,2014,kidane,2012). Besides, limited achievements were made
in terms of the development of professional associations as perceived from the perspective of the
Western model. Ethiopian Professional Association of Accountants and Auditors (EPAAA) was
established in 1973, mainly as a state initiative through the Auditor General (Mihret and Bobe,
2012). They also stated that the Association has not developed the capacity to control entry into
professional practice. Instead, EPAAA has continued to import professional accounting
qualification through an arrangement in which it grants automatic membership to ACCA qualified
professionals.
After the downfall of the communist system in 1991 the current Ethiopian government has made
some notable efforts to improve the accounting profession of Ethiopia. OFAG was established by
Proclamation No.68/1997 by which it was set up “to make efforts, in co-operation with concerned
organs, to promote and strengthen accounting and auditing professions. The OFAG undertakes
regulation of the Ethiopian accounting profession. Article 14 of Proclamation 68/1997 empowers
the OAG to ‘issue, renew, suspend and cancel certificates of competence of auditors and
accountants who provide auditing and accounting services…” (Government of Ethiopia, 1997).
Besides, the EPAAA has been re-activated and three other professional associations, i.e. the
Ethiopian Accounting and Finance Association (EAFA), the Ethiopian chapter of the Institute of
Internal Auditors (IIA), and the Accounting Society in Ethiopia (ASE) have been established
(Mihret et al, 2009). It has membership in Eastern, Central, and South African Federation of
Accountants (ECSAFA).According to World Bank and IMF joint initiative program (ROSC,
2007) EPAAA’s purpose is to further professional accounting and auditing in Ethiopia. However,
EPAAA is still far from being a strong association. It is not a professional certification or
regulatory body. It is more like a “voluntary club”, with about 45% of the qualified professional

accountants in Ethiopia being members of EPAAA. This review stated two main issues that
undermine the position of EPAAA. First, EPAAA does not have legal backing in the country’s
laws, essential for regulatory responsibilities. Second, EPAAA does not have IFAC membership.
2.6.1. Professional Education and Training in Ethiopia

Ethiopia continued using western accounting education and professional certification since the
introduction of modern accounting.
The British orientation of accounting practice has been sustained through professional accountancy
training provided by the Association of Chartered Certified Accountants (ACCA) (Mihret et al.,
2012). On the other hand, accounting education was introduced into Ethiopia’s higher education
with the assistance of American academics in the early 1960s (Kinfu, 1990; Knowles, 2006)(cited
in Mihret and Bobe,2014). Consequently, Ethiopia’s accounting education has continued to be
American-oriented over the past five decades, owing to a predominant use of American literature.
According to ROSC (2007) there is neither a professional accountancy qualification nor training
available for professional accountancy in Ethiopia. All professional accountants hold foreign
professional qualifications. The leading professional qualification is Association of Chartered
Certified Accountants (ACCA). As for training, there is no institution that provides professional
accountancy training. Professional accountants get their qualification through distance learning.
Despite the availability of Academic accountancy programs in universities and colleges of
Ethiopia, the curriculum as well as text books may not prepare graduates well for enhanced
financial reporting requirements. The curriculum does not include international components in
accounting (IFRS) and auditing (ISA). Mihret and Bobe (2014) argued that tertiary accounting
education draws on the US model whereas professional accountancy training is imported from the
UK; and accounting practice, while not making explicit reference to any financial reporting
framework, tends to have been influenced largely by the UK system. A review of World bank and
IMF teams (ROSC, 2007) criticized that Professional values and ethics are not taught as a separate
subject (as required by IFAC standards on education) although a subject in the curriculum (Civics)
covers general ethics. The textbooks in use are not up to date with recent trends in financial
reporting.

2.6.2. Ethiopia’s Journey towards the adoption of IFRS

Reports on Observance of Standards and Codes (ROSC) a World Bank and IMF joint Initiative
that helps member countries strengthen their financial systems was reviewed accounting and
auditing practices and the institutions underpinning the accounting and auditing environment in
the corporate sector in Ethiopia from September to November 2007.According to this report there
is no accounting and auditing standards set in Ethiopia and in a s ample 35 sets of audited financial
statements the accounting practice vary among institutions and differ from IFRS.
Financial reporting entities of Ethiopian are preparing their financial statements based on the
requirements Commercial code of Ethiopia (1960) and in accordance with sector specific laws and
regulations. For instance, in addition to the commercial code Public Enterprises Proclamation
25/1992 mentioned the requirements of state-owned enterprises financial reporting, The financial
reporting requirements of NGOs are contained in the General Guidelines for the Implementation
of the societies and charities law of Ethiopia (621/2009) and banks and insurance companies are
presented in accordance with national banks requirement set forth in banking and insurance
business directives respectively. All the above sector specific laws including the commercial code
of Ethiopia didn’t require entities to prepare financial statements in compliance with any defined
accounting standards or for their auditors to comply with any defined auditing standards.
Therefore, every auditor determine accounting standards for their clients and most institutions
follow advice of their auditors on how to prepare financial statements until the proclamation of
Ethiopian financial reporting law 847/2014.
Consequently, ROSC (2007) provides policy recommendations aimed at improving the quality of
financial reporting in the country. Among others, revise the Commercial Code 1960 and the other
relevant laws and regulations, Enact a financial reporting law, issue accounting and auditing
standards and Establish a National Accountants and Auditors Board were the major once. In
recognizing this effort, the Ethiopian government has taken major regulatory actions to improve
the accounting and auditing practices of the country. During the writing of this study the
government has already revised the national income tax law and processing the revision of
commercial code of Ethiopia. Besides, the government has enacted a financial reporting law
847/2014 and announced the official adoption of IFRS issued by ISAB which is a major

breakthrough in the history of Ethiopian accounting. It has also establish Accounting and Auditing
board of Ethiopia (AABE) through council of Ministers regulation number 332/2014 a body
responsible to regulate the accounting and auditing professions of Ethiopia.
The board has the following Duties and responsibilities as set forth in the regulation number
332/2014;
✓ setting accounting and auditing standards and code of conduct to regulate the behavior of
professionals; register and certify professionals and firms to provide such services; review
and monitor the work of professionals and firms rendering accountancy and/or audit
services and reporting entities; providing professional qualification training, supporting
education and continuous professional development programs; enforcing the financial
reporting law and taking disciplinary measures on those who do not comply with the
provisions of the law and the regulation set by the Government and directives, other
relevant policies and guidelines issued by the Board.
Proclamation Number 847/2014 sets out financial reporting frameworks applicable to different
reporting entities. Therefore, as per article 5(1) of this proclamation the financial statements to be
used when preparing financial statements shall be
1. International financial reporting standards
2. International financial reporting standards for SMEs
3. International Public sector Accounting standards applicable to societies and charities issue
by the international accounting standard board or its predecessor or issued by the international
public sector accounting standard board or its successors as adopted, adapted or amended by the
board.
In line with the power given by to regulating the accountancy profession and ensuring its
development in the country AABE Plans a three phase transition over a period of three years for
reporting entities in Ethiopia (AABE, 2016).
Phase 1: Significant Public Interest Entities - Financial Institutions and public enterprises
owned by Federal or Regional Governments
July 8, 2016 is recommended as the date for adoption of IFRS for all financial institutions and
large public enterprises. Any entity that starts preparation for transiting would need to convert its
closing balances at July 7, 2015 to IFRS-based figures which then become the opening balances

as at July 8, 2015 for IFRS-based financial statements as at July 7, 2016. This provides opening
balances for July 8, 2016 which is the first IFRS full financial statements as at July 7, 2017 (with
2015/16 as comparative year).
Mandatory reporting for these reporting entities shall be June 30, 2018 or July 7, 2018. This means
that all financial institutions and government owned (Federal and Regional) public enterprises in
Ethiopia will statutorily be required to issue IFRS based financial statements for the year ending
June 30, 2018 or July 7, 2018.
Phase 2: Other Public Interest Entities (ECX member companies and reporting entities that
meet PIE quantitative thresholds) and IPSAs for Charities and Societies
All other public interest entities (ECX member companies and reporting entities that meet the
qualitative thresholds for PIE) and Charities and Societies are expected to mandatorily adopt IFRS
and IPSAs (for Charities and Societies), for statutory purposes, by July 8, 2017. This means that
all other public interest entities and Charities and Societies in Ethiopia will statutorily be required
to issue IFRS and IPSAs based financial statements respectively for the year ending July 7, 2018.
Phase 3: Small and Medium-sized Entities

IFRS for SMEs shall mandatorily be adopted as at July 8, 2018. This means that all Small and
Medium-sized Entities in Ethiopia will statutorily be required to issue IFRS based financial
statements for the year ending July 7, 2019.
2.7. Review of Empirical Literatures

The comparability, credibility, and positive capital market effects of adoption to capital market
participants are not disputed. Consequently, there is growing appreciation of the usefulness of
IFRS by countries in different regions of the world irrespective of the size of their economies or
financial reporting traditions. It is not possible, however, to draw indisputable conclusions on the
overall effects of mandatory IFRS adoption based on the available research (ICAEW, 2015). This
is because different researchers arrive at different conclusions and it is applicable only to some
companies or some countries.
The impact, benefits and costs of the transition to IFRS vary from country to country depending
on is starting point, characteristics and culture (Dunne et al., 2008). ICEAW (2015) on its
summaries of 200 empirical research papers conducted on the effects of mandatory IFRS adoption

conclude that “IFRS adoption benefits were unevenly distributed among different firms and
different countries due to differences in institutions and incentives, there may have been either
negligible benefits or even negative effects rather than benefits for particular firms or countries”.
The comparability of financial reports depends on a consistent interpretation and application of
IFRS across countries. Social, political, economic and cultural factors in countries influence
accountants' professional judgments, and differences across countries may lead to an inconsistent
interpretation and application of IFRS (Poudel et al., 2014). On their study of IFRS adoption the
case of Nepal found that the adoption of IFRS is likely to be problematic due to the country's
contextual environment.
On the same way, Hail et al (2009) studies conclude that, firms’ reporting incentives are shaped
by many factors, including a country’s legal institutions (e.g., the rule of law), the strength of the
enforcement regime (e.g., auditing), capital market forces (e.g., the need to raise outside capital),
product market competition, a firm’s compensation, ownership and governance structure and its
operating characteristics.
Overall, researchers argued that IFRS improves transparency, comparability, credibility, and
positive capital market effects, reduces cost of capital, corporate investment efficiencies and
international capital flows (Dunne et al., 2008, Mira etal, 2006, Epstein & Jermakowicz, 2010,
Zeghal &Mhedhbi ,2006, Daske and Gebhardt,2006, Dodiya,2013, Harton Etal,2010, Lourenço
& Branco, 2015).
The IFRS adoption benefits notwithstanding, there are however, a number of challenges to be
faced in the process of adoption of the new standard (Iyoha and Owolabi, 2012). Some of the
challenges includes lack of knowledge and expertise in IFRS, Quality of education and training,
High cost of implementation, resistant to change, poor incentives of managers and auditors,
complexities of standards, the absence of general guidelines, inconsistency of laws and regulations,
weak statutory enforcement, lack of technical Expertise, High cost of implementation, Poor
preparedness (Ball, 2003, Dwommor, 2017, Abedana & John Gayomey, 2006, Weaver and woods,
2015, Madawaki, 2012). Obazee, (2007) stated that the principal factors affecting the
implementation of IFRS in Europe, America and the rest of the world are cultural issues, mental

models, legal impediments, educational needs and political influences in those countries rather
than the most widely perceived technical issues (as cited in Amanamah,2017).
The study entitled “the Challenges Faced by Reporting Entities on Their Transition to International
Financial Reporting Standards in Europe” revealed that lack of adequate education, training,
Knowledge of IFRS and securing executive level support and resources are the major challenges
faced by reporting entities on their transition to IFRS (Weaver and Woods ,2015). Weak regulatory
frame work and enforcement mechanisms are challenges of IFRS adoption in GCC countries
which affected the quality of their financial reports (Aljifri, 2013).
Dwommor (2017) indicated that a better understanding of the challenges of adoption may help
countries to prepare and take precautionary measures before adopting IFRS. The findings on the
challenges of IFRS adoption, however, are heterogeneous and inconclusive. The challenges of
IFRS adoption vary with respect to the context of the study.
Siaga (2012) categorized challenges of IFRS adoption that were experienced by different African
Countries under five specific categories namely financial, Educational, technical, institutional and
enforcement challenges. He mentioned that there are financial constraints to adopt IFRS which
seems also play a negative role in education and technical capacity. Lack of coherence between
the educational and professional programs are the source for skill shortage in the accounting
professional in Africa. This problem also results the shortage of technical knowledge to implement
the standard. The coherence between Accounting authorities and government/regulatory bodies
appears to be challenge in Africa.
Besides, Iyoha and Owolabi (2012) found that ethical environment and the ability to protect
qualified and competent employees are the most important challenges in Africa .They stressed that
corporate transparency is a particularly important component of good governance as it ensures the
protection of parties (both individual and institutional) who have operational interest in financial
reporting in terms of accurate and reliable information which are needed in order to take well-
considered economic decisions.
The study conducted on IFRS adoption in Nigeria shown that inadequate preparation time, lack
of coherence of laws, shortage of technically accountants and auditors and lack of IFRS training
materials were obstacles (Madawaki,2012) where as in Libya lack of technical skills and

inadequate knowledge professional accountants, inconsistency of regulatory framework,

inadequate education and training of accountants, weakness of professional accountancy body and
lack of an independent oversight body were a challenges faced during IFRS adoption (
Zakari,2014).
Dwommor (2017) conducted a study entitled “IFRS Adoption in Ghana: The Dimensions of
Challenges Firms Encounter “ found that firms in Ghana did encounter some challenges such as
IFRS Complexity, lack of Knowledge and Expertise, Regulation problems, System and Processes,
and weak Institutional Support. In addition According to Amanamah (2017), though the cost of
implementation was very high and accountants and business managers’ faced some challenges in
the implementation of the standards due to its complexity in Gana. The case study of Kenya and
south Africa shows that there had been facing a problem of conflicting of existing laws and IFRS
requirements, the gap between accounting education and IFRS, in ability of accountants and
professional bodies to apply IFRS ,Cost of implementing IFRS, complexity of standards were the
major problems (UNACTED,2008).
Though a couple of studies have been carried out on the challenges of IFRS adoption in developing
countries including Africa (Amanamah, 2017, Dwommor, 2017, Madawaki, 2012, Zeghal &
Mhedhbi, 2006, Zakari, 2014,), there is a dearth of empirical study in the areas of IFRS adoption in
Ethiopia. Only few researchers were conducted their study on the benefits, challenges and progress
of IFRS adoption in Ethiopia (Mihiret, 2016, Kassa et al, 2015, Hailemichale, 2016, Simegn, 2015,
and Deyuu and Pasricha, 2016, Bekelle, 2016). According to these studies implementation costs,
complexity of standards, lack of IFRS implementation guidance, increased volatility of earnings,
lack of technical skills and inadequate knowledge of professionals, Resistance to Change, Absence
of Professional Institutions, high level training requirement, lack of proper instructions from
regulatory bodies problem, and problem with IFRS use of fair value accounting were identified as
the major challenges IFRS adoption in Ethiopia. However, all of these researchers were conducted
their study based on the perceptions of the respondent’s and theoretical justification of IFRS
adoption. As a result, they failed to communicate the practical challenges of IFRS as the
implementation was commenced recently and still ongoing.
Therefore, the focus of this study is the practical challenges of IFRS implementation in Ethiopia
particularly in Private Banks which are the first phase IFRS adopters per AABE requirement.

CHAPTER THREE
3. Research Methodology
This section of the research has explained the research Purpose, research design, Sources, Methods
and Tools of Data Collection, Sampling Techniques and Sample Size, Methods of Data Analysis,
and description of variables used in the research.
3.1. Research Purpose

The purpose of this study was to describe practical challenges of IFRS adoption by Ethiopia private
Banks. It has described the status of IFRS implementation in and the practical challenges faced
during the adoption through primary and secondary or documentary evidences.
The challenges that has been focused under this study are Corporate governance, Capacity and
Strengths of regulatory body (AABE), Professional Accountancy bodies, Training and Education,
adequacy of transition period, planning, Availability and transparency of market information, Cost
of transition and management support. The challenge are identified by referring different sources
such as existing studies published in well journals, ABBE strategic plan (2016 to 2020), Ethiopian
Financial reporting Proclamation 847/2014,different national and sectoral laws of Ethiopia and
considering the real problems observed on the ground. Besides, this challenges are the main
challenge which affected IFRS implementation in many countries.
3.2. Research Design

Conducting an Empirical study on the adoption of IFRS which is new to Ethiopia in general and
the banking industries in particular requires the researcher to discover various kinds of data to
enable him to draw conclusions based on the findings. Therefore, to achieve this objective and to
address the research questions the researcher used mixed method design that encompasses a
combination of both qualitative and quantitative methods. The quantitative data were used to
substantiate and support the qualitative data that were collected using different data collection
methods and tools. Hence, employing the mix of qualitative and quantitative research methods
enabled the researcher to consolidate, triangulate and cross-check the data collected, which in turn
allowed formulating a holistic interpretive framework of the study. Bryman (2006) stated that
mixed method provides a wealth of data and help the researcher to discover findings that they had
not anticipated (as cited saunders et al, 2009).

3.3. Sources, Methods and Tools of Data Collection

To answer the research questions and come up with pertinent findings, both primary and secondary
data had been used. The primary data were collected by questionnaire and interview of the banks
IFRS project implementation team members. The researcher has interviewed IFRS
implementation team leaders of the Banks under study to substantiate the data collected through
questionnaire. Questionnaires were distributed to all 71 IFRS implementation team members OF
12 Banks and out of which 53 of the participants are completed the questionnaire and responded
accordingly.
On the other hand, secondary data were collected by referring published and unpublished sources
of data such as books, academic studies, Articles, journals, periodicals, magazines, newspapers,
annual reports of the banks, Proclamation and directives issued by federal government, annual
plans of the regulatory bodies and various websites etc. For instance, well known international
journals were referred and used as a support of the result of this study. Moreover, Local studies
conducted in the areas of IFRS were reviewed and compared against with this study. Similarly,
proclamation and regulations which specify the financial reporting requirements of Ethiopia as
well as well as measurements and recognitions of assets and liabilities were referred.
Using the above different types of procedures for collecting data and obtaining the information
through different sources helped to boost the validity and reliability of the data and interpretation
(Zohrabi, 2013). Since all different techniques and procedures have different effects, using
different methods can cancel out the ‘method effect, that will lead to greater confidence being
placed in the researcher’s conclusions (saunders et al, 2009).
3.4. Target Population, Sampling Techniques and Sample Size

The researcher has selected all 16 private commercial banks operating in Ethiopia as population
of this study. This is due to all private commercial banks are facilitating the IFRS adoption process
together through Ethiopian bankers association. This helps the researcher to access the required
data easily in an organized manner. Purposive non-probability sampling was employed to select
the participants of this study. The selection of the sampling method is based on the findings of
Tongco (2007) revealed a purposive non-probability sampling technique is most effective when
one needs to study a certain cultural domain with knowledgeable experts within. Cresswell and
Plano (2011) added that purposive sampling techniques employed when identifying and selecting

individuals or groups of individuals that are especially knowledgeable about or experienced with
a phenomenon of interest (as cited Palinkas et al, 2015).
As IFRS is a new terminology to Ethiopia in general and private banks in particular, the
participants of this study need to have specialized expertise and Knowledge in the areas of IFRS
to enable the researcher to answer the research questions and to meet the research objectives.
Zeghal & Mhedhbi (2006) argued that the adoption of IFRS is a very Strategic and critical decision;
it requires a high level of education, competence, and expertise to be able to understand, interpret,
and then make use of these standards.
Therefore, based on their role and close involvement in the process of IFRS adoption, the target
populations of this study were IFRS project implementation team members of private banks. The
researcher believed that those who have close involvement in the adoption has better knowledge
than others. Consequently, the participant selected for these study were all IFRS project
implementation team members of 16 private banks which are about 100 in number. Unfortunately,
due to non-willingness of four banks (Buna international bank, Berhan bank, Awash and United
Banks) to accept researches, the researcher forced to downsize the number of banks from 16 to 12
which directly affected the number of participants. Hence, the researcher has distributed
questionnaires’ to 71 IFRS project team members of 12 private banks.
3.5. Methods of Data Analysis and Interpretation

Following the completion of the data collection, the data were edited, structured, coded and entered
in to SPSS version 20, for analysis and interpretation purposes. The data were analyzed using
descriptive statistical methods. These includes Frequencies, percentages, means, Medians, Modes
and standard deviations were used to summarize and give condensed picture of the collected data.
The parameters employed to describe the variables being studied were measured by five point
likert scale. The scale consists of the level of the agreements or disagreements of the respondents
ranging from strongly disagree to strongly agree. The levels are comprising ordinal values as
follows: 1=Strongly Disagree on the statement (SD), 2=Disagree on the statement (D) , 3=Neutral
on the statement (N), 4= agreed on the statement (A), 5=Strongly Agreed on the statement (SA)..
In addition, there are two variables (Cost of Adoption and Management support) measured by
using Likert type scale such as extremely low, low, neutral, high and very high. The answer/ratings
of the respondents were summed to drive an overall score for the factors being analyzed.

In fact there is a controversy on the type of statically analysis (parametric or non-parametric) used
to analyze the results of the likert scale data. Some scholars argued that Statistics, such as means
and standard deviations, have unclear meanings when applied to Likert scale responses because of
these observations, experts over the years have argued that the median should be used as the
measure of central tendency for Likert scale data, Similarly, other experts have contended that
frequencies (percentages of responses in each category) (Gail M. and Anthony R.). Gardner and
Martin (2007) and Jamieson (2004) reveled that Likert data is of an ordinal or rank order nature
and hence only non-parametric tests will yield valid results (as cited Murray.J, 2013).
On the other hand, Norman (2010) using real scale data found that parametric tests such as Pearson
correlation and regression analysis can be used with Likert data without fear of “coming to the
wrong conclusion” (as cited Murray.J, 2013).Pell (2005) agreed that parametric tests can be
conducted on the summed scores of Likert scale data provided that the assumptions are clearly
stated and the data is of the appropriate size and shape. A research conducted by Murray (2013),
entitled “Likert Data: What to Use, Parametric or Non-Parametric?” concluded that parametric and
non- parametric tests conducted on Likert scale data do not affect the conclusions drawn from the
results (Murray, 2013).In the same vein, Norman (2013) explained that parametric tests are
sufficiently robust to yield largely unbiased answers that are acceptably close to ‘‘the truth’’ when
analyzing Likert scale responses ((as cited Murray.J, 2013).
Therefore, the data analysis of this research has been conducted by using Frequencies, percentages,
means, Medians, modes and standard deviation as deemed necessary. The result of the analysis are
interpreted by taking the mean value of the response of the respondents.
3.6. Reliability Test

A reliability analysis was carried out on the perceived task values scale comprising 59 items to
assess the internal consistency of the questionnaire used in this study. Consequently, Cronbach’s
alpha showed the questionnaire to reach acceptable reliability α=.90.
Reliability Statistics result

Cronbach's Alpha=.90 N of Items =59
Source: Questionnaire survey, 2018.

CHAPTER FOUR
4. Results and Discussion
4.1. Measuring IFRS implementation process and status of private banks

In this section of the study the researcher provides an overview of the process and status of private
banks IFRS implementation project. As part of their implementation process all private banks
together had been recruited a well-known international Audit firm, Price Water House Coopers
(PWC) as their consulting partner of the adoption. Banks have cascaded the national IFRS
implementation road map set by AABE for first time adopters with four stages. These are:
➢ Completion of opening statement of financial position preparation up to January 31, 2018
➢ Completion of Comparative financial statement preparation as of comparative date up to
February 28, 2018
➢ Completion of preparation of the first quarter interim IFRS based financial reports up to
March 15, 2018
➢ Closing of 2017 /2018 book of accounts based on IFRS requirement up to June 30, 2018
Therefore, the researcher used the cut of dates as a reference to measure the status of IFRS
implementation of banks.
IFRS Adoption/implementation: is the process of converting the banks existing reporting system
based on IFRS requirements as adopted by International Accounting Standard Board (IASB). The
conversion is realized when the first annual financial statements is produced by an explicit and
unreserved statement of compliance with IFRSs. This involves three major activities such as
preparation of opening statement of financial position (July 01, 2016), Comparative financial
statement at comparative date (June 30,2017) and interim IFRS based financial reports for the four
quarters of 2017/2018 then later production of the first set of IFRS based financial statement.
Preparation of opening financial statements: -it is the reporting entities statement of financial
position at the date of transition to IFRSs. Banks are required to prepare opening statement of
Financial Position on the transition date (July, 2016). Prior to the preparation of opening statement
of financial position banks were required to organize an IFRS project implementation team.
Following the establishment of the team banks conducted GAP analysis between where it is in
accordance with their existing reporting standard or framework and where it wants to be in

accordance with IFRS. The conversion process requires a complete, retrospective restatement of
assets, liabilities and equity in conformity with IFRSs. Therefore the following set of activities
should have been conducted to produce the opening statement of financial position. These are
Recognize all assets and liabilities required by IFRSs, Derecognize all assets and liabilities not
permitted by IFRSs, Classify all assets, liabilities and components of equity in accordance with
IFRSs, Measure all assets and liabilities in accordance with IFRSs, Any adjustments resulting from
applying IFRSs instead of previous GAAP in the opening IFRS, Present a number of
reconciliations between previous GAAP and IFRSs.
Until the final date of data collection for this study April 10, 2018, the private banks opening
statement of financial position were not produced while the dead line was over on January 31,
2018.
Comparative Financial statements: - Comparative financial reports are required for the year
prior to the reporting period. Therefore, Private Banks are required to prepare at least four types
of financial statements as of June 30, 2017 and had been expected to deliver by February 15, 2018
as per the work schedule set by them and the consultant. The financial statements and related
activities required to be delivered are statement of financial position, statement of profit or loss,
statement of other comprehensive income, statement of cash flows, Statement of changes in equity,
notes to the financial statements, Choice and amendment of accounting policy.
Similar with the opening statement of financial statements, private banks didn’t deliver the
statements and activities required at the comparative date as well.
Interim financial reports:- interim financial reports are a kind of financial reports which shows
the position, performances, cash flows and earnings of an entity for a quarter. As per the work plan
produced by private banks, Interim financial reports for the first quarter should have been prepared
as March 15, 2018. The required financial statements and activities are the same with the one stated
for comparative period.
In this case also, private banks are unable to deliver interim reports until April, 2018 which is the
final period of this research data collection.
Therefore, considering the above facts the researcher could able to conclude that the IFRS
implementation processes of private banks are lagged and not running in line with their schedules.
Unless the banks take an immediate corrective action, the chance of meeting the deadline set by

the regulatory body for the production of their first IFRS based financial statement is very low as
the reporting date is approaching.
During the interview, IFRS implementation team leaders expressed that the possibility of meeting
the deadline is unthinkable because the data required for the interim reports are not provided to
the consultant yet. It will be made after the completion of opening and comparative financial
reports. Interim reports are necessary for the preparation of the first IFRS base financial reports.
In the following section the researcher analyzes the practical challenges of IFRS implementation
by private banks
4.2. Analysis of the results of the Survey Questionnaire

The results of the data collected from IFRS project implementation team of 12 banks through
structured questionnaire are analyzed below.
4.2.1. IFRS project implementation team formation across Banks

All private banks have organized IFRS project implementation team to facilitate their accounting
standard transition process. Some of the banks have independent IFRS project implementation
team members which are solely responsible for the implementation process whereas some banks
IFRS team members has facilitated the implementation in addition to their regular activities.
Table 4.1: IFRS project implementation team formation across Banks
Number Name of Bank No. of IFRS implementation project Team Members
1. Abay Bank 10
2. Abyssinia bank 7
3. Addis International bank 4
4. Cooperative Bank of Oromiya 5
5. Dashen Bank 5
6. Debub Global Bank 4
7. Enat Bank 5
8. Lion International Bank 6
9. NIB International Bank 5
10. Oromiya International Bank 7
11. Wegagen Bank 6
12. Zemen Bank 7
Total 71
13 Awash Bank Excluded from the study
14 Buna International Bank Excluded from the study
15 United Bank Excluded from the study
16 Berhan International Bank Excluded from the study
Source: Researcher’s own Survey, 2018

As shown on the table above banks has organized IFRS implementation team consists of 4 to 10
members. Since all of private banks have conducted IFRS adoption through one international
consultant (PWC) their adoption status is found at similar stage. Therefore, it is unable to study
the impacts of the size of IFRS implementation team for the effectiveness of the implementation.
However, as per the interview with project team members, having large number of project team
member is recommended than the small number. This is because, as the standards are many and
complex, it would help the members to divide each other s and one can specialized on a specific
standard. As per their recommendation for those banks that have independent IFRS team, four
members may be enough whereas for those who didn’t have separate IFRS implementation team
up to 10 members are recommended.
4.2.2. Respondents demographic data

The following section shows the demographic data of the IFRS project implementation team
members
4.2.2.1. Education level of the respondents

Table 4.2. Education levels the respondents
Education levels the respondents
N=53 Education Frequency Percent
Diploma 1 1.9
Degree 32 60.4
Masters 20 37.7
Total 53 100.0
As depicted on the above table most of IFRS implementation team members of banks (60%) have
possess their first degree, 38% have second degree and 2%% have diploma. Regardless of the
relevance of the degree given by the universities towards IFRS implementation, IFRS
implementation team members of banks have good academic backgrounds. Its relevance towards
the IFRS implementation has been discussed in detail under Education and training variable
section which is one of the nine variables considered under this study.

4.2.2.2. Professional membership/Certification

Table 4.3.Membership/Certification
Professional membership/Certification status of respondents
N=53 Certification Frequency Percent
ACCA 5 9.4
DIPIFR 5 9.4
None 43 81.1
Total 53 100.0
Regarding to professional certification only 9% are ACCA members and the other 9% have
possess Diploma in IFRS (DIPIFR) whereas the rest 81% are not certified with professional
accountancy qualification.
4.2.2.3. Experiences of IFRS Team Members
Fig.4.1 Respondents Year of Experience (Source: Researcher’s own Survey, 2018)

As it is shown on the above figure, majority of IFRS implementation team members (45%) of
banks have more than 10 years of experience, 36% have 7 to 10 years of experience, and 17% have
4 to 6 years of experience and 2% have 1 to three years of experience. Majority of the teams are

experienced which would have positive contribution for the success of IFRS implementation
process. IFRS requires data for a long period of time back from the implementation period, having
those experienced team members enables to extract the required data well than those who have
little experience.
4.2.3. Challenges of practical implementation of IFRS by private banks in Ethiopia

In this section practical challenges of IFRS adoption by private banks are discussed based on the
responses of IFRS project implementation team.
4.2.3.1. Corporate governance

In this context corporate governance refers the role of the higher governing bodies (BOD) of banks.
The researcher constructed three series of statements that assumed to describe and reliably measure
the influence of corporate governance of the banks on its implementation of IFRS project. These
are BOD follow up, Knowledge and cooperativeness. The statements consist of the scale
expressing the level of agreements or disagreements of the respondents. The levels and their
ordinal values are: 1=Strongly Disagree on the statement (SD) 2=Disagree on the statement (D)
3=Neutral on the statement (N), 4= agreed on the statement (A), 5=Strongly Agreed on the
statement (SA). The determination of whether there is a strong corporate governance or not is
decided by taking the average score (Mean) of the responses of respondents Corporate
Governance. Therefore, the higher score implies the existence of weak corporate governance and
being a potential challenge for the success of IFRS implementation by banks

Table 4.4. Corporate governance of Banks

SD D N A SA Total
Fr
Fre Fre Fre
eq Fre Fre
qu qu qu
ue % que % que % % % %
en en en
nc ncy ncy
cy cy cy
Label N y
The Bank Lacks strong BOD which 0 0 2 3.8 3 5.7 17 32.1 31 58.5
5
undertakes regular follow up on the
3
1 process of IFRS implementation 53 100
BOD knowledge about IFRS and its 5 1 1.9 1 1.9 6 11.3 21 39.6 24 45.3
2 transitional process is poor 3 53 100
There is high resistance by different 5 0 0 3 5.7 6 11.3 24 45.3 20 37.7
3 departments while asking cooperation 3 53 100
Mean= 4.28
Median=4
Mode=5
Std. Deviation=0.62
The above table shows that out of the respondents of IFRS project implementation teams of 12
banks, 58% have strong agreed and 32 % agreed that banks lack strong BOD which regularly
follows up the success of IFRS whereas the rest 4% and 6% have Disagreed and neutral
respectively on this statement.
Secondly, the respondents have been asked to indicate their level of agreement or disagreement on
the knowledge of BOD towards IFRS. Accordingly, 45% of the respondents are strongly agreed
and 40 % agreed that that BOD knowledge about IFRS is poor while the rest 4 do not believe that
BOD Knowledge is poor and 11% respond neutral.

With regard to resistance to change by different departments of banks which is expected to provide
inputs to IFRS implementation project teams, 45% agreed and 38% strongly agreed that there is
résistance to change by managements of different departments where as 6% disagreed and 11%
give neutral response. Resistance to change is one of the symptoms of availability of weak
corporate governance.
Finally, the researcher takes the average (Means) of respondents’ response on the three statements
so as to conclude the significance of this factor. The researcher purposely analyzed the mean,
median and Modes to know whether the averaging method (methods used to measure the central
tendency) has an impact on the conclusion of the findings or not. As a result, all the three methods
show almost similar results.
Therefore, on average respondents strongly agreed (4.28) that there is weak corporate governance
in private banks. As it can be seen from the response of the respondents, from the three important
parameters designed to measure the corporate governance of banks, majority of the respondents
are Agreed or strongly agreed that the BOD are weak in terms of follow up of the implementation
process, knowledge of IFRS and cooperativeness with the project team to reduce resistance faced
by some departments. For instance, if the implementation process of IFRS doesn’t regularly follow
up by the higher governing body of the banks (BOD), the implementation leads to be delayed.
Because, IFRS requires timely adjustment of inconsistent internal policies and procedures (mainly
the change of the accounting and HR manuals), and strengthening internal control which the
responsibility mainly lies on the BOD.
Similarly, if the knowledge of BOD about IFRS is low, they wouldn’t understand what kind and
how much support is required to implement IFRS. The support may be in terms of allocating
adequate fund, insisting to deploy enough man power etc. The impact of the last but not the least
parameter on the success of the implementation, as IFRS is a complete change of the accounting
process of the entities, in this case banks, it requires to reinstate the book of accounts
retrospectively at least two years back to prepare the opening and comparative financial reports.
In addition to this, more years of data may be required to determine for instance post-employment
benefits of the employees, loan provisions, acquired date of fixed assets etc. The owner and
custodians of this data are different departments such as HR, Credit, procurement and logistics etc.

Unless the board insists the departments to provide timely and reliable data upon requested by the
project team, the delay of the implementation process is an inevitable.
In line with this finding, the assessment made by UK National Audit Office (2008) on readiness
of IFRS adoption by UK firms shown that Board and Audit Committee engagement is crucial to
ensure that they are involved in the project and aware of the areas of impact and the potential risks
involved in the transition.
Weaver & Margaret (2015) in their qualitative study conducted in the case of Europe found that
there is big resistance to change and the question that is asked first is ‘do we have to do this’.
Therefore, they recommend that, to get round this problem there should be a strong board member
and board level sponsorship, otherwise it just becomes ‘an accounting problem’ and is hard to get
people to take it seriously, devote resources etc. They also conclude that, reporting entities which
involved in IFRS transition require strong corporate governance in shaping the efficiency and
perceived success of their transition which is in conformity with the findings of this study.
Ramanna and Sletten ( 2009) on their study conducted in a sample of 102 non-European Union
countries found that the success of IFRS adoption is less likely among countries with poor
governance institutions than those with good governance institutions where IFRS adoption may
be associated with high opportunity (as cited Stain bank ,2014) which highly supported the result
of this study.
4.2.3.2. Enforcement of Financial reporting regulatory Body

This refers the existence of a body which rigorously enforced; specify the financial reporting
standards, minimum requirements for recognition, measurement and disclosure of financial
statements which reporting entities shall comply to be IFRS adoption success full. The researcher
constructed seven parameters that assumed to describe and reliably measure the enforcement level
of financial reporting regulatory body (AABE) towards effectively regulating and monitoring of
the proper implementations of the newly adopted reporting standard called IFRS
The parameters are emphasized on the AABE’s support and review mechanisms, adequacy of
works shops and seminars organized, the rationalization of the IFRS implementation road map,
Level of collaboration with different governments sectors to amend contradicted laws and
regulations with IFRS, provision of technical guidelines and interpretations, effectiveness of

monitoring and review process, Coherences of instructions and orders given by different stake
holders.
Similar with the above variable, the parameters used to describe this variable also measured by
five point Likert scale comprising the level of agreements or disagreements of the respondents.
The levels and their ordinal values are: 1=Strongly Disagree on the statement (SD) 2=Disagree
on the statement (D) 3=Neutral on the statement (N), 4= agreed on the statement (A), 5=Strongly
Agreed on the statement (SA). Each statement has been analyzed by taking the percentages of
respondents choosing each response options; and the Mean of the summed score of an individual’s
response to all items comprising in this variable has been taken to Evaluate and conclude the
influence of the AABE toward the success of IFRS implementation by private banks.
The statements are wording with unfavorable to the capacity and strengths of AABE. Therefore,
the higher score implies that the inefficiency of the regulatory body (AABE) to regulate and
monitor the success of IFRS implementation.
Table 4.5: Effectiveness of review mechanisms and support
There is no effective practice review mechanisms and support that ensure proper and effective
implementation of the IFRS implementation roadmap
N=53 Label Frequency Percent
SD 0 0
D 5 9.4
N 7 13.2
A 20 37.7
SA 21 39.6
Total 53 100
The SPSS result of the respondent response indicates that 40% of the respondents are Strongly
agreed and 38 % agreed that there is no effective practice review mechanisms and support that
ensure proper and effective implementation of the IFRS implementation roadmap where as 9%
disagreed on this statement and 13% are neutral .

Table 4.6: Adequacy of workshops, seminars, forums

Lack of adequate workshops, seminars, forums etc. is challenges for smooth transition & successful
implementation of IFRS
Label Frequency Percent
SD 1 1.9
D 1 1.9
N 4 7.5
A 29 54.7
SA 18 34
N=53
Total 53 100
With respective to the adequacy of workshops, seminaries and forums organized by AABE to
enable the reporting entities trained on IFRS implementation related issues, 34% of the
respondents strongly agreed and 55% of the respondents agreed there is lack of adequate
workshops, seminars, forums etc. for smooth transition & successful implementation of IFRS
where as 2% are strongly disagreed and 2% disagreed on this challenge and 8% responded neutral.
Table 4.7: Reality of IFRS transition road map developed by AABE
The IFRS transition road map developed by AABE is not realistic and not takes into account the
capacity and readiness of the nation in general the entities in particular
SD 0 0
D 3 5.7
N 13 24.5
A 21 39.6
SA 16 30.2
N=53
Total 53 100

IFRS transition is a strategic transition which requires the readiness of the country in terms of
trained man power, institutionalization of relevant bodies and capacities of reporting entities for
implementing IFRS. Consequently, the researcher asked the respondents to share their level of
agreements or disagreements on the road map developed by AABE and the countries readiness in
general and the banks in particular. Therefore, Majority of the respondents agreed that the IFRS
implementation road map is unrealistic and not take in to account of the nations as well as the
banks readiness.
Table 4.8: Collaborate with relevant government Sectors
AABE lacks to collaborate with relevant government agencies such as NBE, MOFEC & ERCA to
identify and ensure timely amendments of contradicted laws and regulations with IFRS
N=53 D 4 7.5
N 8 15.1
A 21 39.6
SA 20 37.7
Total 53 100
The result of the above table shows that there is a problem of Collaboration and amendments of
Contradicted laws. 38% of the respondents strongly agreed and 40% agreed that banks are affected
by contradicted laws with IFRS where as 8% of the respondents’ disagreed and 15 neutral.
As per the interview feedback got from Finance directors “there is contradiction between NBE
and ERCA laws against with IFRS requirements. For instance NBE required banks to calculate
the loan provision based Basel II where as IFRS required to use the Basel III system”. Besides,
ERCA requires entities to use pooling depreciation method for fixed assets procured before IFRS
implementation where as banks were choose to use straight line method of depreciation as they
believed that this method reflects best the economic life and usage of their assets which the major
the criteria recommended by IAS 16 while selecting depreciation methods.

Table 4.9: Provision of technical guidelines, interpretations and tools

There is lack of technical guidelines, interpretations and tools and other supporting materials that
takes into consideration national context and sartorial issues
D 1 1.9
N 4 7.5
A 28 52.8
SA 20 37.7
Total 53 100
International financial reporting standards are highly complex standards which require technical
guidelines, interpretations and tools. The implementations of the standards are difficult while
contextualizing in to the national contexts and realities. Therefore, the researcher found this point
very relevant and needs to be measured. The result shows about 91% of the respondents agreed
that it’s a challenge for the proper implementation of IFRS and 2% are disagreed and the rest one
responded neutral.
Table 4.10: Effectiveness of monitoring and process review of IFRS implementation
There is no effective monitoring and process review of IFRS implementation process by

AABE.
SD 1 1.9
D 3 5.7
N=53 N 11 20.8
A 23 43.4
SA 15 28.3
Total 53 100

SPSS result shows that 43% & 28 % of the respondents answered strongly agreed and agreed
respectively whereas 2%, 6%, and 21% responded strongly disagree, disagree and neutral
respectively.
Table 4.11. Coherence of the regulatory system and implementation of IFRS
Lack of coherence in the regulatory system becomes cause for serious misunderstandings and
inefficiency in the implementation of IFRS
D 5 9.4
N 5 9.4
N=53
A 27 50.9
SA 16 30.2
Total 53 100
IFRS is developed to the consistency the reports. Therefore, there should be clear instructions and
coherence on regulatory systems at a national level. In the banking industry, there are different
government stake holders such as NBE, ERCA and AABE which affects their reporting
requirement. For instance, national bank’s loan loss provision directive is not consistent with the
one required by IFRS and there are many ERCA regulation which affected the implementation
negatively. Hence, the researcher asked the IFRS implementation project team members to identify
whether this problem affected their implementation or not. Accordingly, 81% of the respondents
agreed that this factor is a challenge for the implementation process while 9% responded disagree
and the rest neutral.
Table 4.12.Mean Median And Mode Capacity and Strengths of the Financial reporting regulatory
Body (AABE)
N Valid 53.00
Missing -
Mean 4.06
Median 4.00
Mode 4.00
Source: SPSS output on participant’s response

The mean result of this variable shows that, on average respondents are agreed (4.06) that lack of
capacity and strengths of the regulatory body is a potential challenge for the success of IFRS
implementation in the banking sector. Majority of the respondents do agreed that AABE didn’t
enforce and assist the banks to facilitate the implementation process as per the road map laid down.
As a first time adopters, Banks required to have capacity building workshops, trainings on specific
complex standards, sharing of others experience and feed backs on their status and implementation
quality from AABE. In addition, AABE is required to enforce other government institutions such
NBE and ERCA to amend their contradicted laws consistent with IFRS requirements so as the
reporting entities can facilitate the transition process smoothly. Therefore, unless there is adequate
enforcement and reporting incentive mechanism, banks may fail to meet the dead line as well as
the report produced may lack the required quality and become irrelevant for decision makers.
In line with this finding, Kassa etal (2015), Simegn (2015), Deyuu and Pasricha (2016) shown that
lack of proper instruction and guidance from the regulatory body, and inadequate laws and poor
enforcement mechanisms was a challenge for IFRS adoption. This also found consistent with
(Aljifri, 2013) revealed that Weak regulatory frame work and enforcement mechanisms are
challenges of IFRS adoption in GCC countries which affected the quality of their financial reports.
In the same vein, the result of an assessment made in the case Kenya and south Africa shown that
Rigorous enforcement of IFRS at the national level poses practical challenges due to absence of
adequately resourced enforcement institutions and lack of adequate coordination mechanisms
among relevant institutions (UNACTED, 2008). This assessment also added that lack of coherence
in the regulatory system becomes cause for serious misunderstandings and inefficiency in the
implementation of IFRS. This result is also supported by findings of many researchers which
documented that the existence of strong and power full regulatory body leads companies to comply
IFRS requirements while weakly monitored or subjected to little enforcement leads non-
compliance of IFRS requirements. (Daske et al., 2008, Nobes, 2013, Masoud, 2014, Nobes, 2013)
As per the interview with private banks IFRS project implementation team leaders, supervisors
from AABE have been visited them and interviewing about the challenges and the process.
However, the supervisory team didn’t provide any support or directions on the issues raised by
banks .As per the information got from one respondent, the supervisors of AABE has been visited
their bank three times in the year 2017/2018.This implies that there exists monitoring mechanisms

though the purpose of conducting the monitoring is not clear as their banks didn’t get back outputs
after monitoring.
4.2.3.3. Professional Accountancy (Associations) Bodies

This constraint is concerned the availability of strong accountancy professional bodies and
association. In Ethiopia there are two professional accountancy associations and one auditing
association namely Ethiopian Professional Association of Accountants and Auditors (EPAAA)
and Accounting Society of Ethiopia (ASE), and Internal Auditors (IIA). Accountancy professional
associations play a key for the successful Convergence and integration of IFRS all over the world.
The concept of IFRS was initially developed by those professional associations organized in
different countries. Therefore, this variable is measured by the seven Parameters constructed in
detail in a way to describe and evaluate the roles of professional bodies on the smooth transition
and successful implementation of IFRS in Ethiopia.
The parameters comprise the scale expressing the level of agreements or disagreements of the
respondents as the researcher do for the above variables. The levels and their ordinal values are:
1=Strongly Disagree on the statement (SD) 2=Disagree on the statement (D) 3=Neutral on the
statement (N), 4= Agreed on the statement (A), 5=Strongly Agreed on the statement (SA). Each
statement has been analyzed by taking the percentages of respondents choosing each response
options; and Mean of the summing score of an individual’s response to all items comprised in this
variable has been taken to Evaluate and conclude the role of the accountancy bodies for the
successful implementation of IFRS generally in Ethiopia and particularly by private banks.
The statements are wording with unfavorable to the contribution and roles of professional
accountancy bodies. Therefore, the higher score implies that the existence of lack of strong
professional accountancy body.

Table 4.13: Extent of the support of professional accountancy associations

Lack of an extensive and ongoing support from professional accountancy associations are a
challenge for successful implementation of IFRS
Frequency Percent
D 1 1.9
N 4 7.5
A 18 34
SA 30 56.6
N=53 Total 53 100
Majority of the respondents of IFRS implementation project teams ( 91%) agreed or strongly
agreed that there is lack of an extensive and ongoing support from professional accountancy
associations and only 2 % are disagree and the rest 7% answered neutral.
Table 4.14: Ability of giving clarification
Lack of strong Professional accountancy bodies limits the chance of bringing the challenges of
the implementation to the attention of the regulators for clarification
Frequency Percent
D 4 7.5
N 2 3.8
A 23 43.4
SA 24 45.3
N=53 Total 53 100
Professionals associations with memberships of IFAC are playing a role of intermediary by raising
any challenges faced during implementation to the higher regulatory body of the country as well
as to IASB for further clarity. However, there is no professional association with member of IFAC
in Ethiopia which can take this role.
As it can be seen from the above table, majority of the respondents (89%) agreed or strongly agreed
that lack of strong Professional accountancy bodies limit the chance of bringing their challenges

faced during implementation to the attention of the regulators for clarification and 7% responded
disagree and 4 % neutral
Table 4.15: Enhancing capacity building
Lack of strong accountancy body limits the banks option of getting technical capacity building
trainings regarding IFRS Implementation
N=53 Frequency Percent
D 1 1.9
N 3 5.7
A 26 49.1
SA 23 43.4
Total 53 100
Frequent training is required on the areas of more complex IFRS standards through professional
accountancy bodies. Of the respondents about 92% believed that Lack of strong accountancy body
limits the banks option of getting technical capacity building trainings regarding IFRS
Implementation while the 2 % of the respondent don’t agreed on this statement and the rest 6 %
responded neutral.
Table 4.16: The support of Professional Association and Banks IFRS implementation
Ethiopian private banks didn’t get professional supports from The Ethiopian Professional
Association of Accountants and Auditors (EPAAA) & IIA
Frequency Percent
D 5 9.4
N 10 18.9
A 18 34
SA 20 37.7
N=53 Total 53 100
The purpose of this statement is to evaluate how these two key professional associations played a
role of supporting this big national transition activity. Accordingly72% of the respondents

responded that EPAAA& IIA didn’t provide professional supports to banks whereas 9% of the
respondents disagreed and 19% choose neutral.
Table 4.17: Success of IFRS implementation

The accountancy professional bodies fail to contribute for the successful implementation of IFRS
in Ethiopia
Frequency Percent
D 3 5.7
N 15 28.3
A 23 43.4
SA 12 22.6
N=53 Total 53 100
Majority of the respondents (66%) agreed or strongly agreed that the associations of accountancy
profession failed to contribute for the successful implementation of IFRS in Ethiopia whereas 6%
are disagreed with this statement and 28% answered neutral.
Table 4.18: Interaction of practitioners and academicians
lack of an authoritative professional association also limits the possibility of interactions between
practitioners and academics
Frequency Percent
D 4 7.5
N 4 7.5
A 30 56.6
SA 15 28.3
N=53 Total 53 100
If there is no interaction between practitioners and academicians, there will be a challenge for
succeeding in this kind of new and nationwide project. Of the respondents 85% agreed or strongly

agreed that they didn’t get a chance of interactions with academicians due to lack of a body which
facilities this initiative where as 7.5% of the respondents are disagreed and 7.5% neutral.
Table 4.19: The role of professional association and Experience sharing programs
Banks don’t have a chance of experience sharing with other adopters other than banking sectors
due to lack of a body to organize experience sharing sessions
Frequency Percent
D 8 15.1
N 7 13.2
A 15 28.3
SA 23 43.4
N=53 Total 53 100
Accounting professional bodies plays the role of organizing in experience sharing programs among
adopters. This may help the banks to take important lessons how IFRS implementation is going
on other industries. From the respondents 68% responded that there is no chance of experience
sharing IFRS adopters other than the banking industries and 15% believed that there is a chance
of experience sharing and 13 % didn’t know.
Table 20 : Mean, Median, Mode and SD of Professional Accountancy (Associations) Bodies

N Valid 53
Missing 0
Mean 4.13
Median 4.00
Mode 4.00
Std. Deviation 0.56
Source: SPPS output on participants’ response
As shown on the mean result of the above table, on average respondents agreed (4.13) that lack of
Strong accountancy professional association poses a challenge for IFRS implementation by private
banks. Transitioning from national financial reporting standards to IFRS has the potential to create
a need for clarification or interpretation of the provisions of certain IFRS in relation to certain

country-specific circumstances. The case study of South Africa provides a good example of how
the South African Accounting Practices Committee promotes participation of the stakeholders in
the country in providing input into the IASB standard-setting process (UNACTED, 2008).
Professional Accountancy bodies available in Ethiopia such as institute of Internal Auditors (IIA),
Ethiopian Professional Association of Accountants and Auditors (EPAAA) and Accounting
Society of Ethiopia (ASE) are existed weak and didn’t provide significant contributions for the
success of IFRS implementation. None of these organizations have member ship status of
International federation of Accountants which is a global association of accountancy professional
bodies and Authorized to accredit the members to provide certification for accounting
professionals. IFAC has the power to influence IASB during standard settings and interpretations
of complex standards.
A Strong Professional accountancy body contributes to the development of accounting profession

starting from giving theoretical knowledge to implementing it to the ground. Their contribution is
especially highly significant at the time of implementation international accounting standard like
IFRS, they provide capacity building trainings, conduct gap assessments showing red flag when
reporting identities are practiced the standards and they even certified accountants with relevant
accounting profession etc. In addition, they contribute in promoting regulatory coherence on IFRS
implementation by working closely with various national regulators and resolving practical
implementation issues that arise during IFRS implementation. However, due to lack of strong
accountancy body the reporting entities in Ethiopia in general and banking industries in particular
are losing the contributions of these associations which directly affected the banks IFRS
implementation process. Besides, the banks are obliged to send IFRS implementation team
members abroad for trainings with incurring high cost, most of IFRS team members are losing the
chance of getting capacity building trainings. The data collected on this study shows that only 20%
of IFRS implementation project team members have got adequate training while the rest didn’t
get.
Therefore, Lack of strong and independent professional accountancy body is a problem for the
success of IFRS implementation by private banks. This result is in conformity with (Mihiret,
2016). It was also identified by the study conducted by World Bank and IMF initiative (ROSC,

2007) that lack of a strong professional body leaves no domestic mechanisms for monitoring and
enforcing continuous professional development in Ethiopia which is consistent with this study.
This shows that there is no any improvement in this regard even after ten years of physical period.
4.2.3.4. Education and Training

This refers to the accountancy education and training available in the country and its relevance for
IFRS implementation. In addition to this, this variable emphasized that the education level and
training taken by the respondents. Eight important parameters were employed to measure this
constraint. Education and Training variable is measured using eight important parameters.
Capacity building schemes, level of Education and competency, Number of qualified professional,
relevance of educations thought at Ethiopians higher institutions for IFRS implementation,
practical experience of Professionals, training institutions and facilities, pre-implementation
trainings, availability of training materials.
The parameters comprise the scale expressing the level of agreements or disagreements of the
respondents. The levels and their ordinal values are: 1=Strongly Disagree on the statement (SD)
2=Disagree on the statement (D) 3=Neutral on the statement (N), 4= agreed on the statement (A),
5=Strongly Agreed on the statement (SA).
Each statement has been analyzed by taking the percentages of respondents choosing each
response options and the Mean of the summing score of an individual’s response to all items
comprising in this variable has been taken to Evaluate and conclude the influence of the Education
and Training towards the success of IFRS implementation by private banks.
The statements are wording with unfavorable to training and Education variable. Therefore, the
higher score implies that lack of adequate training and education is a challenge for the success of
IFRS implementation.

Table 4.21: Education and Training

SD D N A SA
Total
Fre Fre Fre Freq
que que que Freque Freque uenc
Label N ncy % ncy % ncy % ncy % ncy % y %
Lack of adequate technical capacity 2 3.8 2 3.8 13 24.5 36 67.9

building schemes is a challenge for
1 IFRS implementation 53 53 100
1 1,9 5 9.4 17 32.1 30 56.6
IFRS Implementation requires a high
level of education & highly skilled and
2 competent accounting professionals. 53 53 100
The numbers of qualified professional 1 1.9 1 1.9 11 20.8 17 32.1 23 43.4

accounts are inadequate to meet the
3 needs of private banks 53 53 100
1 1.9 1 1.9 3 3.5 24 45.3 24 45.3
Gap between the accounting education
thought in Ethiopian Higher education
and IFRS requirement is a challenge to
4 get competent accountants 53 53 100
In adequacy OF training institutions 1 1.9 4 7.5 22 41.5 26 49.1
and facilities with an affordable cost is
a challenge to fill skill gaps of IFRS
5 implementing teams 53 53 100
3 5.7 17 32.1 33 62.3
There was limited training on IFRS
6 prior to its implementation 53 53 100
Limited availability of training
materials at an affordable cost is a
7 challenge for the transition process 53 1 1.9 3 5.7 10 18.9 26 49.1 13 24.5 53 100
8 53 53 100
9 53 53 100
10 MEAN=4.34
11 MEADIAN=5
12 MODE=5
13 S.D=0.49

IFRS is a complex standard which preparers of the financial reports require to possess ample
technical skills. Therefore, 93% of the respondent agreed that Lack of adequate technical capacity
building schemes is a challenge for IFRS implementation while only 3.8%% have expressed their
disagreement and 3.8 % neutral.
Respondents have been asked to express their level of agreement or disagreement on the education
and competency that IFRS implementation demanded. Hence, from the total respondents 89%
agreed or strongly agreed that IFRS implementation requires a high level of education & highly
skilled and competent accounting professionals. Only 2% are disagreed with this statement. The
researcher supported the findings of this item with the IFRS implementation project teams’
education level collected under demographic data section of the respondents.
As it can be seen from table 4.2 above, 60% of the respondents possessed their first degree and
38% masters and the rest 2% have diploma. In terms of their Educational level IFRS adoption
project team members have good educational level however; the relevance of this degree towards
the implementation of the IFRS is questionable; because, the curriculum of the education system
failed to alien with IFRS.
From the respondent 75% believed that there is inadequacy of qualified accountants in the market
and 21% the responds neutral and the rest 4% believed that there is adequate number of qualified
professional accountants. The researcher again wanted to relate this statement with the
respondent’s demographic data question asked to state if they have professional accountancy
certification such as ACCA, CIA, CPA, and IFRS etc.
As shown on Table 4.3 above., only 18% are certified and rest 82 % are not or in number out of
53 respondents of IFRS implementation team members only 10 members are certified the rest 43
are not certified.
As per the study conducted by the word bank and IMF experts (ROSC, 2007), there is a major gap
between what is thought in the university and IFRS requirement. Therefore, the result of this study
confirmed that 91% of the respondents supported a Gap between the accounting education thought
in Ethiopian Higher education and IFRS requirement is a challenge to get competent accountants.
Only 7% are disagreed and neutral responses.

There are no adequate local institutions which can provide trainings to fill the skill gaps of
practitioners. Those available institutions lack practical experience in the areas of IFRS and trained
only the theoretical aspects. Consequently, respondents were asked to provide their level of
agreement or disagreement. Hence, 90% of the respondents are agreed or strongly agreed that there
is no adequate institutions with affordable cost and 2% disagreed on this statement and 7%
responded neutral.
Almost all of the respondents (94%) agreed that there was limitation of training prior to starting
the implementations. Similarly, the researcher has collected a data of the respondent to evaluate
the frequency and adequacy of the training they have got yet.
Frequency and Adequacy of Trainings
Fig.4.2.Frequency and Adequacy of Trainings

As it in shown on the above figure, 50% of the respondents got IFRS related trainings rarely,30%
took the training occasionally,10% frequently and the rest ten never took IFRS related training.
With regard to the adequacy of the trainings 80% of the respondents didn’t get adequate training
only 20% of the respondents got adequate training.
As IFRS is an international standard originally based in London, there is shortage of training

materials in the country. Of the respondents 71% have a challenge of getting training materials
with affordable cost and 7% have disagreed and 19% responded neutral.

The Mean of responses of respondents on education and training shows that, on Average
respondents are strongly agreed (4.34) that inefficiency of the education and training system of the
country is a potential challenge for IFRS implementation; Because, the educations and trainings
available locally are not adequate enough to implement IFRS.
Even though the curriculum of accounting education in the universities framed based on IFRS,
Universities are still providing based on the old curriculum which is dominated by US-Based
(GAAP) books and references. Consequently, those who have possess accounting first and second
degree lack knowledge of IFRS. As accounting standards and practices become more complex, the
ability to apply and interpret those standards and practices will depend on the educational level of
the population (Choi and Meek, 2008) (cited in Shima and Yang, 2012).There is no local
recognized professional accountancy qualification as well as training. However, in recent times
some local consultancy firms and Addis Ababa university have provided IFRS trainings .In
addition to the trainings Addis Ababa University have included IFRS in its accounting education
curriculum. However, it is not approved by ministries of Education till now. It is a good lesson
and should be expanded to all universities operated in Ethiopia. ACCA Ethiopia is the only
institution which awarded professional accountancy qualification in our country.
As per the information got from ACCA Ethiopia delegate Yodit Kassa on November 29, 2017, there
are only 250 ACCA members in Ethiopia while thousands of reporting entities are in need of
professionals. As depicted above there are only 10 certified IFRS implementation project team
members from the total of 53 respondents. The active students enrolling their studies in ACCA
Ethiopia are 2000 whereas 8000 students are becoming inactive. The expensiveness of fees paid
for ACCA may be a possible cause for the increment of the dropout rates.
Therefore, it is concluded that inefficiency of training and education is a challenge for the practical
implementations of IFRS in private banks of Ethiopia. In line with this finding, important papers
shown that lack of adequate education, knowledge, training and skills giving rise to improper
application of the IFRS standards and are significant challenges for effectiveness of IFRS
implementation (Jermakowicz and samaha, 2006, Stapleton, 2008 and Tesfu, 2012, kassa, 2015).
Similarly, Al-Akra et al. (2009) contend that the accounting and auditing education in Jordan acts
as a deterrent to the successful implementation of IFRSs, Zeghal and Mhedhbi (2006) conclude
that he need to create an active education system is one of the significant factors that affect the

accounting standards. This study is also in conformity with the findings of Madawaki, (2012)
reveled that one of the principal challenges Nigeria may encounter in the practical implementation
process, shall be the shortage of accountants and auditors who are technically competent in
implementing IFRS / IAS.
4.2.3.5. Transition Period

This stands for the length of preparation and transition schedule set by the regulatory body. This
is measured by five series of parameters which the researcher believed that can describe the
transition period impact on the implementation of IFRS. The parameters are the extent of the
preparation time, the implementation road map and banks readiness, adequacy of the 22 month
period given by AABE to first time adopters, a need of additional transition period, and the
relationship between the length of the transition period and quality of financial reports. The
parameters were measured by five point Likert scale expressing the level of agreements or
disagreements of the respondents. The levels and their ordinal values are: 1=Strongly Disagree on
the statement (SD) 2=Disagree on the statement (D) 3=Neutral on the statement (N), 4= agreed
on the statement (A), 5=Strongly Agreed on the statement (SA). Each statement has analyzed by
taking the percentages of respondents choosing each response options; and the Mean of the
summing score of an individual’s response to all items comprising in this variable has been taken
to Evaluate and conclude the effect of adequacy of transition period towards IFRS implementation.
The statements are wording with against to the adequacy of the transition period. Therefore, the
higher score implies that the transition period given by AABE is not adequate and a factor for the
inefficiency of the IFRS implementation.
Fig. 4.3: Extent of preparation Time

As depicted from the above figure, 93% of the respondents agreed or strongly agreed that
implementation of IFRS is a complex process that requires extensive preparations time whereas
the rest 7% responded neutral and none of the respondent disagreed with this statement.
Fig.4.4. IFRS implementation road map

The respondents were asked to express their level of agreement or disagreement whether the
nationally designed IFRS implementation road map taking in to account of the capacity of
reporting entities in general and banks in particular. Accordingly, 87% of the respondents believed
that the national IFRS implementation Road map doesn’t take in to consideration the capacity and
readiness of banks whereas 4% disagreed with this statement and the rest 9% responded neutral.
Fig.4.5: Adequacy of preparation period
Fig.4.5: Adequacy of preparation period

The adequacy of transition periods given by AABE has been measured by the response of IFRS
implementation project teams’. Consequently, 83% of the respondents claimed that the transition
period is inadequate while 6% adequate and 11% responded neutral.
Fig.4.5: Needs of Additional Preparation time
Fig.4.6: Requirements of Additional Preparation time

As per the response of the majority of the respondents banks are still in need of additional time for
preparing trainings, organizing Seminars and workshops and getting experience sharing with other
countries which already adopted IFRS.
Fig 4.7: Length of Transition period and Quality

The researcher measured the impacts of the inadequacy of the transition period on the quality of
financial reports. The reporting entities may focus on the completion of the project rather than
taking care of the quality of the report. Accordingly, 92% of the respondents strongly agreed or
agreed that inadequacy of the transition period will affect the quality of financial reports while
only 2% didn’t agree and 6% responded neutral.
Finally the researcher calculated the mean to conclude the agreement or disagreement level of
respondents based their average response.
Table 22: Mean, Median and Mod and SD of variable of Transition period
N Valid 53.00
Missing -
Mean 4.19
Median 4.00
Mode 4.00
Std. Deviation 0.55
Source: SPSS output on participants’ response
On Average respondents agreed (4.19) that the IFRS transition period is inadequate. Conversion
of the existing reporting system with the new method of reporting is a strategic decision which
affects the overall accounting infrastructures of the organizations. Therefore, initially the
organizations are required to establish IFRS implementation project teams, to conduct GAP
assessments between the existing reporting standard and IFRS, changing accounting policies,
Modifying their IT systems, training staffs, recruiting consultants and conducting recognition, de-
recognition, measurement and classification of the assets and liabilities of an organization based
on IFRS requirement are some of the tasks required to conduct by the adopters. Each of the
activities are required significant period of time.
Especially in Ethiopia, there is limited availability of accounting infrastructures to switch from
existing reporting system to a new one. There is no trained manpower in the market and
experienced consultants are not available in the local market. In the case of Banks, they are obliged
to recruit international consultants (PWC) to smoothen the transition process. These all processes
are demanding a significant time and cause the delay of banks reporting deadline. As per the dead
line set by AABE the first time adopters in general banks in particular required to produce the first

IFRS based financial reports by June 30, 2018. In line with this, banks were cascaded the road map
and set deadlines for each of the deliveries in collaboration with their consultant. As per this
schedule, preparation of opening statement should have been completed by Jan 31, 2018,
completion preparation of comparative statement by February 15, 2018, and preparation if the first
IFRS based interim statements by Mach 15, 2018. Until the final data collection of this project
April, 2018 none of the activities has been delivered. This shows that banks may fail to meet the
AABE’s deadline as it nearly approaching.
To estimate the likelihoods of meeting the deadline the researcher asked the IFRS implementation
project teams of the banks and summarized their response as follows
Table 4.23: Likelihood of banks meeting the first IFRS reporting dead line
How likely are the banks able to meet the dead lines set by AABE
Very Likely 4 7.5
Somewhat Likely 38 71.7
Not Likely 11 20.8
Total 53 100.0
According to the majorities’ response the chance of banks meeting the regulator’s dead line is
somewhat likely. This shows that they are unsure on its delivery within the dead line.
The findings this study is in line with, Weaver & Woods, (2015) shown that insufficient time and
resources to adequately plan for the transition was a challenge for IFRS transition in Europe.
Similarly, Madawaki, (2012) argued that, the time lag between decision date and the actual
implementation date is not sufficiently long to be ready for IFRS implementation in Nigeria. In
addition, the case study of Malaysia revealed that significant length of time was required to issue
the first IFRS reports due to complexity of the standards (Yaacob & Che-Ahmad, 2011) and in UK
most organizations the impact assessment and understanding of the new standards took
considerably longer than was expected (NAO,2008)

4.2.3.6. Proper Planning

This is the process of conducting the change management considerations before the
implementations of the project. The researcher tried to measure this factor, how participatory was
the policy of the adoption ,does the targets and deadlines of the adoption set after identifying the
possible obstacles , does the resources of the country in general and reporting entity in particular
enough to implement IFRS, did the preparers, users ,auditors and professional accountancy bodies
participated in IFRS adoption planning process, does the implementation logistically framed work,
did the implementation program taking in to account of the state of readiness of the country in
general and reporting entities in particular. The results of the respondents’ response are analyzed
in the following section.
The parameters were measured by five point Likert scale expressing the level of agreements or
on the statement (A), 5=Strongly Agreed on the statement (SA).

Table 4.24: Proper Planning

SD D N A SA
Tota
l
Fre Fre Fre Fre Freq
Freque que que que que uenc
Label N ncy % ncy % ncy % ncy % ncy % y %
A policy decision of IFRS adoption has 2 3.8 3 5.7 14 26. 15 28.3 19 35.8 53 100
been made without building consensus 4
1 among concerned stake holders 53
The targets and deadlines of IFRS 1 1.9 1 1.9 10 18. 26 49.1 15 28.3 53 100
implementation has been made before 9
2 identify the obstacles 53
Decisions of IFRS implementation 1 1.9 3 5.7 13 24. 21 39.6 15 28.3 53 100
disregards identifying the resources 5
that we have on hand and what we need
3 to implement the new standard 53
Preparers, users, regulators, 1 1.9 8 15. 24 45.3 20 37.7 53 100
professional accountancy bodies and 1
educators need to be engaged in the
planning of IFRS, as well as the
4 implementation 53
A country’s transition action plan to 1 1.9 4 7.5 33 62.3 15 28.3 53
IFRS needs to have a logistical
framework of targeted activities to be
completed within a specified period of
5 time 53 100
An IFRS implementation programme 4 7.5 22 41.5 27 50.9 53 100
needs to adequately assess the state of
readiness of relevant professional
6 accountancy organizations 53
7 MEAN=4.08
8 MEADIAN=4
9 MODE=4
10 S.D=0.58

More than half percent (64%) of the respondents agreed or strongly agreed that the decision of
IFRS implementation has been made without building consensus among stake holders. On the
other hand 9% of the respondents disagreed or strongly disagreed that on this statement while the
rest 26% are neutral.
Out of the respondents 75% argued that the targets and reporting deadlines has been made before
identifying the obstacles of realizing IFRS on the ground and only 4% are expressed their
disagreements and rest 19% provided neutral response.
The decision of IFRS adoption requires adequate human, material and financial resources. With
regard to this IFRS implementation project teams have been asked to forward their level of
agreement or disagreement based on the facts available on the ground. As a result 68% strongly
agreed or agreed that the reporting entities (banks) forced to implement before having the required
resources where as 8% expressed their disagreement and 24% responded neutral.
Majority of the respondents (83%) claimed that the national planning process of IFRS adoption
failed to participate the preparers, users, auditors and relevant professional bodies and 2% the
respondents’ are disagreed.
In terms of logistics of IFRS adoption, 91% of the respondents argued that a countries IFRS
transition plan should be logistically frame worked the tasks to be completed within a specified
period of time.2% answered strongly disagreed and 7% choose neutral.
Considering the role of professional associations towards the adoption of IFRS adoption, the
researcher asked the level of agreements of respondents on this issue. Therefore, all most all of the
respondent (92%) strongly agreed or agreed that the implementation program should take in to
account of the readiness of professional accountancy organizations to take over their role.
The mean of this variable shows that, on average most respondents agreed (4.08) that there was
problem of proper planning in connection with IFRS implementation. This shows that the planning
of the adoption has not been well discussed with stake holders, no effort has been made by AABE
to improve the accounting infrastructure of the country before launching the mandatory adoption
road map, the resources such as human, material and financial resources in the country as a whole
as well as the levels of reporting entities were not match with IFRS needs. Therefore, the
mandatory implementation has been launching without taking in to account the countries readiness

in broad. The pre-requisites of the adoption like strengthening of professional associations,

alignment of the accounting education given by higher education with IFRS based, organizing
training institutions and professional qualifications, amendment of contradicted laws and
awareness creation activities should have been made.
Due to this, most the first time adopters are struggling to smoothen the transition by them self.
Though the scope of this study is limited in the banking industries, the researcher observed that
most of government development organizations like Ethio-telecom, Ethiopian Electric power
corporation and regional governments needed extra time to complete the implementation.In the
meantime Commercial bank of Ethiopia, Ethiopian Airline and Berhan and selam printing
enterprises are among the public enterprises which successfully integrated their reporting system
with IFRS.
As mentioned above private banks are one of the major institutions negatively affected by poor
planning of IFRS implementations.
The results of this study is consistent with Weaver & Woods (2015) shown that successful IFRS
implementations are those that start early, are planned using project management techniques. In
the same way, Madawaki (2012) documented that the transition plan to IFRS / IAS and its
implications for preparers and users of financial statements, regulators, educators and all other
stakeholders have to be effectively coordinated and communicated. He also argued that the
adoption of IFRS / IAS requires substantial preparation both at the country and entity levels to
ensure coherence and provide clarity on the authority that IFRS / IAS will have in relation to other
existing national laws.
The researcher is unable to found previous studies which confirm this result due to those available
doesn’t include his variable their case study.
4.2.3.7. Availability and Transparency of Market Information

This variable concerned with the fairness and accessibility of the values of assets of an
organization. IFRS requires having defined market rate and fair market value to measure
(determine) the value of the assets and liabilities of an organization. Some IFRS standards (IAS
39 & IFRS 7) require reporting of the value of assets base on their fair market value. For instance,
effective interest rate to measure the amortized cost rate, measurement of financial instruments
and impairment testing requires the market value of the assets. Therefore, the researcher found this

factor the most researchable and measures by using six parameters such as availability of the
market, the impact of the market on reliability, relevance and objectivity of the accounting data,
availability of property Valuers and Actuaries, existence of secondary stock market for financial
instrument measurement.
The parameters were measured by five point Likert scale consisting of the level of agreements or
on the statement (A), 5=Strongly Agreed on the statement (SA). The results of the respondents’
response are summarized as follows.
Fig 4.8: Measurement of effective Interest rate

As indicated on the above figure, majority of the respondents (89%) agreed or strongly agreed that
measuring effective interest rate of banks outstanding loans are very difficult due to all banks have
their own interest rate and there is no market rate set for bank loans 4% of the respondents are
disagreed and 7% neutral.

Fig 4.9: Reliability, relevance and objectivity of accounting data

As IFRS is a principle based accounting standard, there is high involvement of personal judgments.
It is an inevitable to judge the fair market value of the assets if there is no active market. Figure
4.9 showed that 91% of the respondent’s expressed that lack of liquid market will affect the
reliability and objectiveness of the data stated in the financial statements where as 6% neutral and
3% disagreed.
Fig 4.10: Availability of Property Valuers
In Ethiopia, there are only two professional property Valuers while there is thousands of reporting
entities. 92% of respondents of IFRS project implementation team members argued that lack of
active market and property Valuers are a challenge for IFRS implementation while 2% are
disagreed and 6% neutral.

Fig 4.11: Availability of Actuaries

There are no licensed professionals actuaries in Ethiopia. Informal Sources told that there is one
Ethiopian working in insurance companies who have taken actuary science but he didn’t conduct
the activities of actuaries yet. Organizations determine post-employment benefits of their
employees by sending their employees data abroad mostly in Kenya and South Africa. As depicted
on the above figure, 93% of the respondents agreed that determination of post-employment benefit
is a potential challenge for IFRS implementation. On the other hand 2% are expressed their
disagreement and the rest are neutral.
Fig 4.12: Measurement of Financial Instruments

Financial assets are among the assets that required to be measured by the fair market value at the
date of reporting. In Ethiopia there is no active secondary market which enables banks to measure

their financial instruments. The above figure showed that, 92% of the respondents argued that lack
of secondary stock market is a challenge for implementation of IFRS in the banks whereas 4% are
disagreed.
Fig 4.13: Fair value measurement and Earning Manipulation

With this statement the researcher analyzed whether the above challenges mentioned with regards
to availability and transparency of fair market value exposed the manipulation of earnings or not.
Consequently, 81% of the respondents strongly agreed or agreed that lack of active and transparent
market will lead the manipulation of earnings due to involvement of personal decisions where as
2% are disagreed and 17% neutral.
Table 4.25. Mean ,Median, Mode, and SD for Availability and Transparency of Market
Information
N Valid 53.00
Missing -
Mean 4.42
Median 5.00
Mode 5.00
Std. Deviation 0.60
Source: SPSS output on participants’ response
As shown on table 4.25, on average respondents strongly agreed (4.42) that Non-availability and
lack of transparent market information is a challenge for the implementation of IFRS by private
banks. To minimize the effect of market information banks used cost model for valuing their fixed

assets as it is possible to choose the measurement model between cost and revaluation model. The
problem is there are mandatory standards which force the banks to use market value. For instance,
loan loss provision, amortized cost, measurement of financial assets and impairment testing are
the major once. It is an inevitable that banks used management judgments in determining the fair
value of those assets which results the manipulation of the earnings and minimize the reliability of
financial reports. For, instance that banks tested impairment by using internal staffs. Therefore,
lack of availability and transparent market information is a challenge which affects the success of
IFRS implementation by banks.
This result finding is consistent with Tesfu (2012) and Gulin & Hladika (2016) shown that fair
value determination is very difficult in the absence of readily available market and doesn’t reflect
the future earning potential of the assets. This study also supported the results revealed that the
absence of liquid market leads the involvement personal judgment which would cause the
incomparableness and misguiding of accounting information (Xuexin &Slayi,2013).They also
conclude that in the absence of liquid market fair value measurement and loss reliability of
financial statements causes for profit manipulation and accounting information distortion.
The case study of Kenya, Pakistan, South Africa and India shown similar result that, there were
facing problem of obtaining market information due to low trading volume and capital markets
are not sufficiently liquid (UNACTED,2008).
4.2.3.8. Cost of IFRS Implementation

This refers the amount of investment required by banks to converge the existing accounting frame
work in to IFRS. Therefore measuring the magnitude of the costs and its impact on IFRS
implementation would be essential. In this study Cost of IFRS implementation is measured by
seven important cost parameters. These are cost of staff training, consultants, Auditing and
compliance, IT and Accounting system adjustment, IFRS implementation guideline and cost of
additional staffs. The parameters comprises Likert type item which ranked from very low to very
cost

Table 4.26: Cost of IFRS Implementation

Very Low(2) Neutral(3 High(4) Very Total
Low (1) ) High(5)
Fr
Fre Fre
Fre Freq Fre eq
qu qu
que % uenc % % que % % ue %
en en
ncy y ncy nc
cy cy
Label N y
5 0 0 2 3.8 12 22. 20 37.7 19 35. 5
Cost of Staff training
1 3 6 8 3 100
5 0 0 1 1.9 3 5.7 22 41.5 27 50. 5
Cost of External consultants
2 3 9 3 100
Cost of auditing and compliance 5 1 1.9 3 5.7 15 28. 26 49.1 8 15. 5
3 standards 3 3 1 3 100
Cost of Adjustment of information 5 0 0 1 1.9 10 18. 20 37.7 22 41. 5
4 systems 3 9 5 3 100
5 0 0 1 1.9 4 7.5 28 52.8 20 37. 5
Cost of Updating accounting system
5 3 7 3 100
Cost of Purchasing IFRS Guiding 5 0 0 4 7.5 14 26. 25 47.2 10 18. 5
6 Materials is expensive 3 4 9 3 100
5 2 3.8 7 13. 14 26. 23 43.4 7 13. 5
Cost of recruiting additional cost
7 3 2 4 2 3 100
8 MEAN=3.98
9 MEADIAN=4
1
MODE=4
0
1
S.D=0.50
1

Regarding with the cost of staff training 36% of the respondents rated very high, 38% high, and
23 % didn’t know the magnitude (neutral), 35% of the respondents rated low.
In terms of consultant cost almost all of the respondents (92%) rated high or very high. The
percentage of their ratings are 51% very high, 42% high, 6% of the respondents didn’t know and
2% rated low. Currently, all private banks have paid around $1 million to their external consultant
(PWC).
Cost of Audit and Compliance: 15% of the participants responded that cost of Audit and
Compliance is very high, 49% rated high, 28% neutral .6% rated low and 2% very low.
IFRS requires adjustment of chart of accounts and reporting formats on the system. Therefore,
respondents were asked to rate the cost of Adjusting IT system. Accordingly, 42% rated very high,
38% high, 19% didn’t know and 2% rated cost of adjusting IT system low.
Majority of the respondents (90%) rated cost of updating accounting system very high or high and
7% didn’t know and 2% rated low.
In respect to Cost of IFRS guidelines and materials, 19% rated very high, 47% high, 26% didn’t
know and 8% rated low. There are no IFRS implementation books and guidelines available in the
local market. Therefore, the reporting entities are required to purchase the books and guidelines
online shopping.
As IFRS requires a formation of separate project teams, it is expected to increase the cost of
recruiting additional staff.

Table 4.27: Ranking costs

Ranking of costs from high to low based on the sum of the percentage of respondent’s response who rated
high or very high
Rank (high cost to low

Frequency %
Label N cost)
Cost of Staff training 53 39 73.6 4
1
49 92.5 1
2 Cost of External consultants 53
3 Cost of auditing and compliance standards 53 34 64.2 6
Cost of Adjustment of information 42 79.2 3
53
4 systems
5 Cost of Updating accounting system 53 48 90.6 2
Cost of Purchasing IFRS Guiding 35 66.0 5
53
6 Materials is expensive
7 cost of recruiting additional cost 53 30 56.6 7
The cost of IFRS implementation are ranked from the highest to the lowest based on responses of
IFRS implementation project Teams Rating. As a result, the higher costs of the banks are external
consultants cost as banks are recruited one of well know audit firm in the world PWC. The second
cost which is higher for the banks is cost of updating the accounting system then the third of the
bank is cost of adjusting information technology. Cost of staff training is ranked at the fourth
followed by cost of purchasing IFRS books and guidelines. On the last Cost of audit and
compliance and recruiting additional staffs ranked at 6th and 7th place respectively.
The mean of the response of the respondents on this variable reveals that, on average ((3.98) IFRS
implementation project teams stated that cost IFRS implementation is high. This shows that cost
of IFRS adoption is one of the challenges of reporting entities as cost affects IFRS implementation
negatively. Banks incurred significant cost for training their employees in the preparation of IFRS
based financial statements both local and abroad based, hiring external consultant due to lack of
in-house knowledge and IFRS experience, updating accounting policies, customizing IT systems,
procurement of IFRS implementation guidelines which is available in the foreign market only and
needed to recruit additional staff to organize dedicated IFRS implementation project teams.

Therefore, the result of this study shows that IFRS adoption requires significant cost which
negatively affected the success of the implementation. For instance, banks sent the finance
managers and some of IFRS implementation teams abroad for training due to lack of experienced
local training institutions. Similarly, they have incurred significant costs to customize the IT
system. For their External consultant (PWC) banks shared and paid nearly $ 1,000,000.00 and
material costs has been paid for purchase of IFRS Guide lines. The researcher unable to weight
the significance of costs with actual figure except the consultant costs. Other costs are analyzed
based o the survey and interview results.
The case of Europe showed that significant preparation and transitional costs have been incurred
during implementation of Mandatory IFRS adoption (ICAEW, 2007) which is in line with the
result of this study. Similarly, the study of George et al (2013) and Stokdyk (2010) (cited in
Dowa,2017) documented that “IFRS adoption as costly to firms because of the greater effort,
knowledge, and information systems needed to implement the new standards, and the additional
effort needed to manage the risk of material misstatements appearing in IFRS-compliant financial
statements. This study also confirmed the results of Tesfu (2012) revealed IFRS adoption increase
internal staff and costs in the case of Ethiopia.
Whereas the result of this study is inconsistent with Dwommo (2017) found that Cost could not b
e a factor of IFRS adoption challenges in Ghana.
4.2.3.9. Management Support

Refers the level of support provided by senior management especially by CEO who is responsible
to run the day to day operations of the banks Management support variable is measured by nine
important parameters. Management understanding, Attention, Experience, Cooperation,
commitment, priority, acknowledgement and acceptance, and resources allocation are the
parameters. Like the cost variable the parameters of this variable are measured by likert type items
which range from Very high support to Very Low. The higher support shows positive effect for
IFRS implementation whereas the lower support implies the problem of management support.
With regard to the value, the higher mean implies the existence of low support and reverse is true
for low perceived value.

Table 4.28: Management support
Very High(2) Neutral(3) Low(4) Very

Total
High(1) Low(5)
Fr
Freq Fre Freq Fre eq
Frequ
uenc % % que % uenc % que % ue %
ency
y ncy y ncy nc
Label N y
4 7.5 16 30.2 3 5.7 25 47.2 5 9.4
Management’s understanding of accounting
53
and financial reporting standards
1 53 100
4 7.5 18 34.0 4 7.5 20 37.7 7 13.2
Management’s attention to accounting and
53
financial reporting related issues
2 53 100
Experience of managers in implementing 2 3.8 12 22.6 3 5.7 27 50.9 9 17.0
53
3 IFRS 53 100
Cooperate with IFRS implementation project 3 5.7 15 28.3 10 18. 20 37.7 5 9.4
53
4 teams 9 53 100
Lack of Commitment and understanding of 4 7.5 14 26.4 4 7.5 23 43.4 8 15.1
the executive on timely and successful 53
5 implementation of IFRS 53 100
Management views IFRS as a priority than as 3 5.7 16 30.2 3 5.7 24 45.3 7 13.2
53
6 regulatory compliance 53 100
Acknowledgement of Management on the 3 5.7 17 32.1 4 7.5 25 47.2 4 7.5
53
7 importance of the IFRS transition process 53 100
Lack Acceptance of IFRS implementation 3 5.7 26 49.1 6 11. 14 26.4 4 7.5
53
8 process at the senior management level 3 53 100
Resources allocated to complete the 4 7.5 23 43.4 5 9.4 14 26.4 7 13.2
transition in addition to their day-to-day 53
9 responsibilities 53 100
10 MEAN=3.18
11 MEADIAN=4
12 MODE=4
13 S.D=0.96
As it can be seen from the above table IFRS implementation project teams have been asked to rate
management’s support towards the adoption activities. The first statement is Management
understands of accounting and financial reporting standards. 7% of respondents rate the
managements understanding very high, 30% rate high ,6% didn’t know the managements
understanding level,47% rate low and the rest 9% rated very low. Therefore, majority of the

respondents (56%) the respondents rated the management’s understanding low. The lower the
understanding of the management the lower will be their support.
The second statement is designed to evaluate how the management is attentive on accounting and
financial reporting related issues.Accordingly,7% of the respondents believe that management has
very high attention, 34% rate management’s attention high,8% neutral, 38% rated very low and
the rest 13% rated the management’s attention towards accounting and financial reporting issues
low. This result shows that in terms of giving attention on accounting and financial reporting
related issues banks management has some gap but it is found moderate that 41% of the
respondents supported the management’s attention is high which leads their support better.
Thirdly the question of how experienced the management in implementing IFRS was rated by the
response of the respondents. Majority of the respondents evaluated that managements experience
of implementing IFRS is low (50%) and very low (17%) whereas only 4% are rated managements
experience very high and 22% rated high. This implies that the lower the managements experience
the lower will be their support toward the implementation.
CEO‘s cooperation with IFRS implementation project team has been measured and rated as
follows. 6% of the respondent’s rate CEO Very highly cooperative, 28% highly cooperative, 19%
neutral, 37% low, and 9% very low cooperation. The aggregate result of this parameter is
confirmed the existence of low cooperation of CEOs.
The fifth statement evaluated whether the management is concerned on the success and timely
delivery of the implementation. The result of respondents shows that the top management’s
concern on the success and delivery of the IFRS project is low. The rates of the respondents
regarding these statements are 7% very high, 26% high, 8% neutral, 43% low and 15% very low.
IFRS project implementation teams also asked to evaluate the statement that Managements view
IFRS as apriority than a regulatory compliance. Accordingly, 6% of the respondents believed that
management view IFRS as very high priority, 30% measured managements view IFRS as high
priority and 8% neutral. On the other hand 45% of the respondents evaluated that management
give low priority for IFRS implementation and 13% of respondents put the managements view on
IFRS implementation very low.

The view of the respondents on the management acknowledgement on the importance of the IFRS
transition also collected. The result shows that 6% of the respondents believed that the transition
process is highly acknowledged, 32% believed that the acknowledgement level of management is
high and 8% didn’t know the managements acknowledgement level Where as 47% of the
respondents measured that the transition process is poorly acknowledge and 8% of the respondents
believed that management’s acknowledgement on the transition process is very low.
With regard to the acceptance of IFRS implementation, Majority of the respondents believed that
the implementation has got acceptance by the senior management. When we see their detail rating
6% rated the management’s acceptance very high, 49% high, 11% neutral, 26% low and 8% very
low. This shows that the banks senior management has well accepted the IFRS implementation
and this will contribute positively to the success of the implementation.
Lastly the researcher measured the level of management support by the adequacy of resource
allocated to the IFRS implementation. The result of the majority of the respondents shows that
there is adequate resources allocation to the IFRS implementation. 7% and 43% of the respondents
evaluated the resources allocated by the management for IFRS implementation very high and high
respectively where as 26% and 13% are rated the resources allocated low and very low
respectively.
The mean result (3.18) of this variable also has shown the existences of the problem of
management support. Poonlar (1987) categorized mean scores ranging from 4.51-5.00 excellent
or very good, 3.51- 4.50 (good), 2.51-3.50 (average or moderate), 1.51-2.50(fair) and 1.00-1.50 is
(poor) (as cited in Adane, 2017).
According to his classification, the mean score (3.18) of this variable indicated that the existence
of the problem and its magnitude is moderate (Average) Therefore, lack of management support
is a problem of private banks hindering during their practical IFRS implementation. The researcher
found this result consistent with Weaver & Margaret (2015) IFRS was not given the support it
deserved by senior management in Europe. No evidence is found to support this finding with local
studies.

CHAPTER FIVE
5. CONCLUSION AND RECOMMENDATIONS
5.1. Conclusion
IFRS has become the financial reporting standard for a significant amount of countries around the
world. The decision of IFRS adoption would be the right choice for Ethiopia to strengthening the
country’s quality of financial information that played a major role for attracting efficient capital
inflows to the country and encourage domestic investments. However, number of practical
implementation challenges needs to address to utilize the full benefits of adopting IFRS.
Therefore, the objective of this study was to investigate the challenges that are hindering the
practical implementation of IFRS by private banks in Ethiopia.
The results of the study shown that weak corporate governance, poor quality of education and
training, lack of supports from accountancy professional bodies, weak enforcements of regulatory
body, inadequacy of transition period, improper planning, Non-availability of transparent market
information, High cost of implementation and weak management support are the major challenges
of private banks to implement IFRS successfully. Unless the challenges faced by private banks
gets an immediate attention of the government, the regulators, professional bodies, higher
institutes, academicians, preparers of financial statements, auditors and reporting entities itself the
national transition process may take longer than expected. The current status of private banks IFRS
implementation confirmed the dalliance of the transition process.
5.2. Recommendations
Based up on the findings of the study, the following recommendations are forwarded.
The adoption and implementation of IFRS in Ethiopia should not be a rushed decision. The country
commenced the actual implementation without having identifying the resources it has and what is
needed for implementation. The country even didn’t address most of the recommendations given
by ROSC (2007) as prerequisite for adoption of IFRS.
1. The regulatory body should ensure IFRS coherence with existing national laws such as NBE
directives and ERCA laws. Though NBE and ERCA are among the board members of AABE, there
are still inconsistent laws and regulations developed by this organization. These and related
governing body laws should be revised by referring IFRS requirement so as reporting entities can
implement this standard without challenging with conflicting laws. Any laws concerning financial

reporting should first be referencing IFRS instead of placing special requirement. In addition,
corrective actions should be taken based on the findings of monitoring and review programs of
reporting entities. For instance, AABE should support the reporting entities by organizing capacity
building workshops and seminars, should provide clear and proper instructions when providing
orders regarding reporting and auditing, and arrange regular meeting periods with reporting entities.
2. As IFRS is a strategic decision which affects the overall corporate reporting structures of
the entities, there should be strong management support and corporate governance
established by entities and ensures that the transition is managed effectively in a way that
the timetable is to be achieved. Management should enhance its understanding and give
due attention for IFRS implementation as one of the banks strategic issue instead of leaving
it only as accounting issue. Besides, management should recognize and motivate IFRS
implementation team members for any efforts and delivery made. All banks management
should ensure the establishment of independent team members by recruiting additional man
power. The IFRS team members of some banks are working the IFRS implementation in
addition to their regular work. Similarly, BOD of the banks should regularly follow up the
process of the implementation and cooperate the team by responding for any of their
enquiries for instance there may be resistance faced by peer departments, may also require
additional budget for implementation. Therefore, the BOD should treat the issue of IFRS
implementation with exceptions.
3. Accountancy professional bodies such as EPAAA, ASE and IIA should reassess why they
are established and existing for. These organizations should take actions to strengthen
themselves in a way they can make significant contributions to the success of this big
national accountancy project. The researcher believed that there will not be any
accountancy professional related task created Ethiopia more than IFRS adoption which
requires the major roles of these associations. In addition to the action taken by the
association themselves the government should take priorities in strengthen them before
commencing the actual implementation of the second and third phase adopters.
Professional Accountancy bodies should strengthen or reorganize their organizational
structure in away to take the role of leading national initiatives and monitoring and
enforcing the domestic accounting profession. Moreover, ASE and EPAA should merge

and integrate as one single strong accounting professional association and tried to be a
member of IFAC.
4. Human-resources-development programme and mechanisms should be established at
national level. There should be accredited and qualified training institutions to alleviate the
skill gaps of preparers of financial statements in a short run and change the accounting
education curriculums of universities. Addis Ababa University has tried to include IFRS in
its accounting education curriculum. Therefore, this lesson should be shard to other
universities and forced them to integrate IFRS module in their curriculum without any
delay.
5. In addition to strengthening local capacity building institutions, there should be state
sponsored scholarship program to train property valuers and actuaries abroad. Besides,
there should be made efforts to establish stock markets in order to determine financial
instruments objectively. Other ways in the absence of liquid market and professional
Valuers, the quality of financial reports would be impaired due to high subjective and may
lead the country to financial crisis.
6. The preparation and transition period given to reporting entities should not be far from the
realities of nation. The length of the period should take in to account of the state of
readiness of the reporting entities and countries reporting infrastructure. For instance, if
there no adequate number of skilled and qualified professionals who can implement IFRS,
the length of the preparation time should take in to consideration of times required for
getting trained staffs. Besides, there are number of activities required to be accomplished
a prerequisite to produce the first IFRS based financial statement. For example,
Recognition and derecognition of assets and liabilities, measurement of assets and
Liabilities, classification of assets and liabilities and preparation of necessary adjustments
so as a reporting entity will prepare opening balance sheet, comparative financial state and
comparative statements. Therefore, the greater challenge witnessed by the first phase
adopters was inadequacy of transition period.

5.3. Implications for future Research

This study was conducted on the challenges of IFRS implementation in Ethiopia the case of private
banks only taking in to account of time and financial limitation. However, it would be quite
imperative to extend similar researches in the case of all first phase adopters. Moreover, it is
suggested to conduct a research on the impact of IFRS on the earnings of reporting entities and the
qualities of financial reports.

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Appendix:
I.QUESTIONNAIRE
Addis Ababa University

College of Business and Economics
MBA Program
Questionnaire
I am a student of Addis Ababa University studying MBA Program. The purpose of this
questionnaire is to collect data for the thesis being conducted on the title “Challenges of Practical
Implementations of IFRS adoption in Ethiopia Private Banks”, for the partial fulfillment of
the requirements for the degree of Master of Business Administration in Finance.
No personality identifiable information is being collected from you and all information you
provide will be combined with other respondents’ data and analyzed in aggregate. Responses will
be kept Confidential at all times and used only for academic purpose.
If you have any queries regarding this questionnaire, please contact me via email:
[email protected]
Thank you in Advance for taking your valuable time!
Addis Ababa University viii

Part 1:
The following are list of factors affecting the implementation of IFRS by Ethiopian private Banks.
Please provide your level of agreement or disagreements with each of the statements. Please put
only one tick mark (✓) for each line in the labeled column where (1-Strongly disagree; 2-
Disagree; 3- Undecided/Neutral; 4 Agree; 5-Strongly agree.)
No. Challenges of IFRS Adoption SD D N A SA
I Corporate Governance 1 2 3 4 5
1. The Bank Lacks strong BOD which undertakes regular follow up on the process of
IFRS implementation
2. BOD knowledge about IFRS and its transitional process is poor.
3. There is high resistance by different departments while asking cooperation
II Capacity and Strengths of the Financial reporting regulatory Body (AABE) 1 2 3 4 5
4 There is no effective practice review mechanisms and support that ensure proper
and effective implementation of the IFRS implementation roadmap
5 Lack of adequate workshops, seminars, forums etc. is challenges for smooth

transition & successful implementation of IFRS
6 The IFRS transition road map developed by AABE is not realistic and not takes
into account the capacity and readiness of the nation in general the entities in
particular
7 AABE lacks to collaborate with relevant government agencies such as NBE,

MOFEC & ERCA to identify and ensure timely amendments of contradicted laws
and regulations with IFRS
8 There is lack of technical guidelines, interpretations and tools and other supporting materials that
takes into consideration national context and sectorial issues
9 There is no effective monitoring and process review of IFRS implementation
process by AABE.
10 Lack of coherence in the regulatory system becomes cause for serious
misunderstandings and inefficiency in the implementation of IFRS
III Professional Accountancy (Associations) Bodies 1 2 3 4 5
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11 Lack of an extensive and ongoing support from professional accountancy

associations are a challenge for successful implementation of IFRS
12 Lack of strong Professional accountancy bodies limits the chance of bringing the
challenges of the implementation to the attention of the regulators for clarification
13 Lack of strong accountancy body limits the banks option of getting technical
capacity building trainings regarding IFRS Implementation
14 Ethiopian private banks didn’t get professional supports from The Ethiopian
Professional Association of Accountants and Auditors (EPAAA) & IIA
15 The accountancy professional bodies fail to contribute for the successful
implementation of IFRS in Ethiopia
16 lack of an authoritative professional association also limits the possibility of
interactions between practitioners and academics
17 Banks don’t have a chance of experience sharing with other adopters other than
banking sectors due to lack of a body to organize experience sharing sessions
IV Education and Training 1 2 3 4 5
18 Lack of adequate technical capacity building schemes is a challenge for IFRS implementation
19 IFRS Implementation requires a high level of education & highly skilled and competent accounting
professionals.
20 The numbers of qualified professional accounts are inadequate to meet the needs of private banks
21 Gap between the accounting education thought in Ethiopian Higher education and IFRS requirement is a
challenge to get competent accountants
22 Inadequacy of training institutions and facilities with an affordable cost is a challenge to fill skill gaps of IFRS
implementing teams
23 There was limited training on IFRS prior to its implementation
24 Inadequate training institutions and facilities at an affordable cost is a challenge to fill skill gaps of
IFRS implementing teams
25 There was limited training on IFRS prior to its implementation
26 Limited availability of training materials at an affordable cost is a challenge for the transition process
V Adequacy of Transition Period 1 2 3 4 5

27 Implementation of IFRS is a complex process that requires extensive preparations
28 The national IFRS implementation Road map doesn’t take in to consideration the capacity and
readiness of reporting entities
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29 The preparation & transition period of 22 months given by AABE is not adequate for conducting
the IFRS transition process
30 Banks require additional time for preparing training manuals, organizing seminars and workshops
and sharing experiences with other countries
31 Lack of Adequate transition time will affect the quality of the financial statements by increasing the
possibility of errors and omissions.
VI Proper Planning 1 2 3 4 5
32 A policy decision of IFRS adoption has been made without building consensus among concerned
stake holders
33 The targets and deadlines of IFRS implementation has been made before identify the obstacles
34 Decisions of IFRS implementation disregards identifying the resources that we have on hand and
what we need to implement the new standard
35 Preparers, users, regulators, professional accountancy bodies and educators need to be engaged in
the planning of IFRS, as well as the implementation
36 A country’s transition action plan to IFRS needs to have a logistical framework of targeted activities
to be completed within a specified period of time
37 An IFRS implementation programme needs to adequately assess the state of readiness of relevant
professional accountancy organizations
VII Availability and Transparency of Market Information 1 2 3 4 5
38 There is problem of measuring effective interest rate due to lack of active market
39 Lack of liquid market affects the reliability and relevance and affects the objectiveness of accounting
data.
40 Lack of active market and property Valuers in the country is a challenge to measure the value of
the assets
41 Lack of Actuaries are a challenge for determining employees post-employment benefit
42 There is Problem of measuring financial instrument due to lack of active secondary market
43 Manipulation or subjectivity in estimates of fair value opens space for manipulation of the earnings
of banks
VIII Cost of IFRS Implementation
No impact
Extremely
Very high
High
low
low
44 Cost of Staff training

45 Cost of External consultants
46 Cost of auditing and compliance standards
47 Cost of Adjustment of information systems
Addis Ababa University xi

48 Cost of Updating accounting system

49 Cost of Purchasing IFRS Guiding Materials is expensive
50 Cost of recruiting additional cost
IX Management Support
No impact
Extremely
Very high
High
low
low
51 Management’s understanding of accounting and financial reporting standards
52 Management’s attention to accounting and financial reporting related issues
53 Experience of managers in implementing IFRS
54 Cooperate with IFRS implementation project teams
55 Lack of Commitment and understanding of the executive on timely and successful implementation
of IFRS
56 Management views IFRS as a priority than as regulatory compliance
57 Acknowledgement of Management on the importance of the IFRS transition process
58 Lack Acceptance of IFRS implementation process at the senior management level
59 Resources allocated to complete the transition in addition to their day-to-day responsibilities
Part 2: General Questions
1. Gender: Male Female

2. Age: under 20 21-30 30-40 Above 40
3. Your highest Academic Qualification: Diploma Degree Masters PHD
4. Professional Membership/Certification: ACCA CPA IFRS CIA Other
(Specify)________________
5. Total Years of experience:________________
6. Current Position(Job Title):______________________
7. If your answer is yes for the above Q. No.7, how adequate is the IFRS training that you have had
for implementation of IFRS: Adequate Not Adequate
8. Did you get training on all IFRS standards? Yes No
9. How frequently are IFRS trainings organized to IFRS project implementation Team
Very Frequently Frequently Occasionally Rarely Never
10. How likely are the banks able to meet the dead lines set by AABE (closing of their books of
Accounts based in IFRS requirement for the year ended June 30, 2018)
Very Likely Somewhat Likely Not Likely
Addis Ababa University xii

II. INTERVIEW QUESTIONS

1. How many are IFRS implementation team members of your bank?
2. How many are the recommended number of IFRS Team members?
3. Do Number of IFRS project team has an impact on the implementation?
4. Do your organization supervise by AABE? If yes How frequent it is?
5. What are inconsistent laws and regulations against with IFRS requirement?
6. What is the status of the Implementation?
7. How is the possibility of meeting the deadlines of IFRS adoption time line?
Addis Ababa University xiii

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CHALLENGES OF PRACTICAL IMPLEMENTATION OF IFRS

IN ETHIOPIA, EVIDENCE FROM BANKING SECTOR

A THESIS SUBMITTED TO MBA COORDINATION OFFICE, COLLECGE

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

ADDIS ABABA, ETHIOPIA

Name: Aytenew Agumas Babil

Addis Ababa University i

SCHOOL OF GRADUATE STUDIES

ADDIS ABABA UNIVERSITY

ADVISORS’ APPROVAL SHEET

_________________________ _________________ _______________

Name of the Advisor Signature Date

Addis Ababa University ii

SCHOOL OF GRADUATE STUDIES

ADDIS ABABA UNIVERSITY

EXAMINERS APPROVAL SHEET

Approved by the Board of Examiners:

____________________________ _________________________ _____________________

Internal Examiner (Name) Signature Date

____________________________ _________________________ _____________________

External Examiner (Name) Signature Date

Addis Ababa University iii

and ability to undertake and accomplish this study.

support, invaluable guidance and encouragement throughout my work.

rendered towards the successful accomplishment of this study.

and affection all through these years.

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Addis Ababa University v

Addis Ababa University vi

AABE Accounting and Auditing Board of Ethiopia

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Table 4.1: IFRS project implementation team formation across Banks------------------------------35

Table 4.10: Effectiveness of monitoring and process review of IFRS implementation-----------45

Table 4.14: Ability of giving clarification---------------------------------------------------------------49

Table 4.24: Proper Planning-------------------------------------------------------------------------------65

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Fig 4.1. Year of experience of respondents’-----------------------------------------------------------37

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Keywords: IFRS, Adoption/Implementation, Ethiopia, Private Banks, and Challenges.

Addis Ababa University xi

1.1. Background of the study

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1.2. Statement of the problem

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1.3. Objective of the study:

1.3.1. General Objectives of the Study

1.3.2. Specific Objectives

1.4. Research Questions

1.5. Scope and limitations of the study

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1.6. Significance of the study

1.7. Organization of the Paper

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2.2. Theoretical and Conceptual Literature Review

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_________________ _ _______

________________ _ _________

________________ _ _________